Tesla Motors Inc (NASDAQ:TSLA) will have to solve three main issues in China if it wishes to sustain business in the world’s largest automobile market, according to a report from Forbes by Kandy Wong: “the transmission of electricity from the grid to the charging stations that are owned by different companies, the approval of multiple levels of government officials and the lethargy of the state-owned grid operators.”
Growing concerns over Model S success in China
Last week Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk visited the country to hand over the first Model S sedans to their Chinese owners. He distributed first eight cars to Chinese customers, along with extending his regret for the delay in the supply. Musk’s primary job in China is now to make sure that Model S owners have enough electricity supply to charge their cars, or else the Model S will be no more than a centerpiece in the parking lots of owners.
Gates Capital's ECF Value II fund was up 9.4% for the first quarter, compared to the HFRI Event-Driven Index's 8.2% gain, the Russell 2000's Value Total Return Index's 21.2% gain, and the S&P 500's 6.2% return. Q1 2021 hedge fund letters, conferences and more Gates Capital Management is an event-driven value . . . SORRY! Read More
There is a growing doubt around the Model S and whether it can be successful on Chinese roads. Musk agreed to the fact that China has fewer stations there during an interview with CCTV news. Shortly after the Model S sedans were distributed, analysts started discussing the hurdles of China’s power system and detailing how the lack of charging stations in China could weigh heavily on Model S.
Tesla facing huge tasks
Not only Tesla Motors Inc (NASDAQ:TSLA), but other electronic car makers also have the same issues while trying to gain ground for their cars. For instance, BYD, which has a thorough knowledge of the local Chinese market condition, could not find any solution to the problem.
The major supply for the electricity to the charging stations will come from NARI Group Corporation, a subsidiary of the State Grid, and Sinopec, one of the oil giants and station belonging to the Beijing-based power generation company Hanergy. This implies that Tesla Motors Inc (NASDAQ:TSLA) will have to ask NARI, Sinopec and Hanergy to jointly find a solution for its fuel problem. Moreover, the state-owned power grids may not be up to the task of producing the needed electricity to the network and require further investment and development.
Apart from closing deals with various Chinese partners for charging stations, Musk would also need to get approval from a number of government officials at the city, county and provincial levels.