With Tesla’s share price hovering at an astronomical $200, attention now turns to China, the largest car market in the world.
The country’s consumers don’t buy cars for environmental reasons. But they do buy them to separate themselves from the crowd and present themselves as a member of the growing wealthy class. The number of millionaires in China is soaring.
Car companies typically heavily inflate the price of their cars in China, mostly because they can and because the Chinese upper class is so wealthy that a higher price actually signifies that the care has more prestige.
But Tesla isn’t going to do that. It’s going after a “fair price” strategy. From Wall St. Cheat Sheet:
Tesla is counting on its competitive pricing strategy — what it calls a “fair price” — to give it a competitive advantage in a country that has not exactly prioritized electric vehicles and doesn’t offer a strong supporting infrastructure. It’s selling its 85 kWh Model S sedan for around 734,000 yuan ($121,000), which after shipping and China’s hefty trade tariffs, works out to around the $80,000 that the car commands stateside, a departure from the usual practice of inflating the cost of the vehicle.
If Tesla can make a big splash in China, the way it has in Europe, the luxury EV maker will be further on its way as establishing itself as a global luxury brand that can address markets that aren’t particularly environmentally conscious.
The irony, of course, is that China is one of the best markets for renewable energy in the world. And with terrible pollution and smog in most cities, the country is introducing EV subsidies (that incidentally won’t impact Tesla). This all bodes well for Tesla, and it’ll have to if the company wants to maintain its skyrocketing share price.