Tesla Motors Inc (NASDAQ:TSLA) has gone for a fair pricing strategy in China, a market where higher prices mean prestige. The mark-up from Tesla, which is half of what is charged by some of the rivals, indicates a bold step taken by the U.S. electric car maker to win over Chinese customers.
Consumers supporting fair price from Tesla
In a blog post last month, Tesla Motors Inc (NASDAQ:TSLA) announced the lower-than-expected 734,000 yuan (HK$933,000) price for its high-end Model S electric car. Though the price is 50% more than in the U.S, it includes only “unavoidable” taxes and transport costs.
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The move from the US carmaker was also supported by the consumers, according to a reader survey on popular site QQ.com. Social media posts mentioning the Chinese name for “Tesla” increased more than seven times on January 23, the day after the blog post. However, analysts feel a fair price strategy could backfire for Tesla Motors Inc (NASDAQ:TSLA) as premium buyers love to flaunt their wealth by spending extra to guarantee quality and cachet.
Shawn Wu, Shanghai-based project manager at consultancy SmithStreetSolutions told SCMP, “It’s not just about the pricing strategy but more to show how to communicate with Chinese consumers in the context of a more transparent pricing world.”
China a “treasure bowl” for global carmakers
Tesla Motors Inc (NASDAQ:TSLA) risks losing its brand value with such pricing, but there is also a possibility that the move may pave the way for other foreign brands, which have been criticized by state media and regulators, for charging inflated prices.
Automakers do charge hefty premium to Chinese consumers, when it comes to luxury. Daimler’s high-end Mercedes-Benz SLS AMG model is priced at 3.1 million yuan, which is 150% more than what it costs in the U.S., and Volkswagen’s Audi TT Coupe has a price tag of 519,000 yuan in China, twice that of the U.S.
It’s not that only automakers are charging steep premiums for high-end products in China, but products ranging from milk powder to handbags are also included in the list. Previously, firms including US retailer Wal-Mart Stores and coffee house chain Starbucks have been taken to task by China’s state television and regulators for charging high prices.
The premium charged by firms spurred China Central Television (CCTV) to term China as the “treasure bowl” for global carmakers last year. In December, a reported listed few such names including Audi and Jaguar Land Rover, owned by India’s Tata Motors.