If you’re a Chinese citizen who owns no stock in Tesla Motors Inc (NASDAQ:TSLA) but is debating the merits of purchasing one of the most exciting car since Steve McQueen’s car from Bullitt, there was still something to take note of during the company’s most recent earnings call.
Tesla Motors Inc (NASDAQ:TSLA) mentioned to investors that the Shanghai government has chosen to exempt the Model S from license plate auctions that can often cost car owners up to $15,000. The Shanghai “lottery” for vehicle registrations was recently explored with some humor by Jalopnik.com.
Shanghai is among a handful of Chinese cities that puts quotas on new car registrations in and effort to stem both traffic and pollution. The fact that the Model S is an emission free car has apparently given Tesla Motors Inc (NASDAQ:TSLA) a boost by allowing new buyers to skip a major cost to car ownership. Both Shanghai and Beijing were sewn in by some of the worst air pollution either city has ever seen.
Registration restriction “helps” foreign-made cars
In the traffic choked city of Shanghai there is something that stands out amongst the millions of cars that fill its streets, 9 out 10 the cars are foreign-made. The citizens of Shanghai bask in luxury and Tesla Motors Inc (NASDAQ:TSLA) and others certainly fit the bill. With the money made in the city in the last 20 years, millions can afford a car and the Shanghai government felt it had to act by restricting registrations on new cars.
As Tesla Motors Inc (NASDAQ:TSLA) works to build its recharging stations in larger cities and ultimately throughout China, this could be a boost for the automaker. Additionally, when cities start charging for license plates in the five figures, it kills manufacturers of less expensive cars.
“Whenever there’s a restriction of new car purchases through the quota system, there is always a big impact on lower-price cars like the ones we make,” says Lawrence Ang, executive director of Geely Automobile Holdings (175:HK), whose Panda minicar sells for 37,800 yuan.
After Beijing introduced its license plate lottery three years ago, sales of Chinese vehicles dropped by over 50%.
The Shanghai auction is unique to the point of just being, well, Chinese. Prospective car buyers must put down around $300 as good faith money. After that they receive a disc loaded with software to bid online. After a few rounds of offers, the city decides on the highest price they can charge and still sell out its allotment for the year. For those who bid that high, they win(?).
For 3,000 prospective buyers of Tesla Motors Inc (NASDAQ:TSLA)’s Model S, the cap on the exemption (for now?), they won’t have to go through this process but can proceed to get stuck in traffic immediately.