Tesla Motors Inc (NASDAQ:TSLA) has said it had plans for China, and now, we have a glimpse of just how big those plans might be. According to Bloomberg, Tesla CEO Elon Musk said they believe China could become their top market. In fact, he thinks sales of their Model S sedan in China could match their sales in U.S. by next year.
Tesla unveils Model S price in China
This week Tesla Motors Inc (NASDAQ:TSLA) revealed the price it is planning for the Model S in China. It will start at 734,000 yuan, or $121,280. Tesla has been taking preorders in China for some time. Musk himself is planning to go to China in March to mark their official entry into the Chinese market. He said eventually, they could build a plan in China, although even without a local plan there, he thinks it will always be their “second-biggest market after the U.S.”
Musk did admit that his aim for Tesla Motors Inc (NASDAQ:TSLA)’s China shipments to match U.S. shipments by 2015 isn’t his “firm prediction” though. Instead, he called it “a low-fidelity guess.”
Comparing Tesla’s Model S in China’s market
According to Bloomberg, Tesla Motors Inc (NASDAQ:TSLA)’s Model S will be in about the same price range as the Volkswagen Audi S5 sedan and the BMW 5-series GT sedan. In addition, the price in China is 50% more expensive than it is in the U.S. But in spite of that fact, Bank of America analyst John Lovallo said the Model S price in China is “well below expectations.”
The reason Tesla’s car is so much more expensive in China is of course related to a 25% duty which is added to the price, plus shipping and taxes. Bloomberg reports that if Tesla had followed all of the standard practices within the industry, it could have charged over $160,000 for the car in China.
As a result though, Musk said, “They’re basically calling us huge idiots for not ripping off customers in China.” Of course he doesn’t think ripping off people is a good “long-term strategy.”
Moving production to China
According to Musk, getting China’s approval to sell the Model S there was a very rigorous process. In fact, he said it was the most difficult approval process they have faced so far. He also said they pretty much will have to set up a factory in China over the long term. That would get rid of tariffs and possibly enable Tesla Motors Inc (NASDAQ:TSLA) to qualify for Chinese green car incentives. Musk said they may even build their first major factory outside the U.S. in China.