China is no doubt a lucrative market for Tesla Motors Inc (NASDAQ:TSLA) with a population of over 1.3 billion, domination in manufacturing and an economic power and addiction for luxury goods, however, it can be a bit risky for high end electronic manufacturers but at the same time can be a most profitable venture. Tesla Motors Inc (NASDAQ:TSLA) is already seeing growth in demand of its electric sedan.
Tesla optimistic on China
Tesla Motors Inc (NASDAQ:TSLA) is for sure eyeing growth in China, claiming that it has already locked in hundreds of pre-orders in Hong Kong for its mean machines. Chinese government is trying to bring down the demand of vehicles that emit greenhouse gases, which could be a favorable move for Tesla. Tesla is all set to open its first showroom in central Beijing at the exclusive Parkview Green mall towards the end of this year. The showroom will be stretched to 8,000 square feet, which is almost thrice the size of its United States showroom.
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Tesla Motors Inc (NASDAQ:TSLA) posted its first ever quarterly profit of $15.4 million, or 12 cents per share in the first quarter of 2013. Revenue came in at $561.8 million from $30.2 million in the first quarter of 2012. For full fiscal 2013, Tesla Motors Inc (NASDAQ:TSLA) is looking forward to deliver 21,000 Model S cars globally, increase for prior guidance of 20,000 units.
Challenges for Tesla in China
However, one major shortcoming that may fade the optimism of Tesla Motors Inc (NASDAQ:TSLA) is that electric vehicle market in China is very small with just 3,000 pure electric cars being sold in the first three quarters of 2012. Tesla will need a Chinese business partner for availing lucrative Chinese EV subsidies and tax breaks. Also, its Model S price will further hike to almost double due to high tariffs.
However, if the demand of Tesla Model S follows a similar trend in China as in the United States then there is little to worry about because whatever the price may be, those who can afford it will buy it.
China represents good market for Tesla Motors Inc (NASDAQ:TSLA), but issues like lack of infrastructure are some hurdles on its way.
Other automakers eying China
China’s luxury vehicle market has been an attraction to many global automakers such as General Motors company which in order to manufacture its popular Cadillac luxury model will open $1.3 billion plant in China. General Motors Company (NYSE:GM) is looking forward to producing 160,000 vehicles annually from the plant. The automaker has already begun manufacturing Cadillac XTS sedan at a plant in Shanghai. It is further looking to extend the dealer network to 200 towards the end of the year, from 69 last year.
Luxurious car makers like Audi, Bayerische Motoren Werke AG (FRA:BMW) (ETR:BMW) and Mercedes are experiencing unexpected demands for their cars as rich class in China is buying luxury goods rapidly.