Why Tesla’s $121,000 Model S price in China makes business sense
Tesla Motors said it would sell the big battery version of its Model S electric sports sedan in China for about $121,000. While that’s an eye-popping number to American car shoppers, it actually represents a restrained, strategic approach for the Palo Alto automaker.
The starting price of the Model S with the 85 kWh battery pack will be $81,070 — the same as in the U.S. About $36,000 in Chinese tariffs and taxes, and another $4,000 to ship the car across the Pacific Ocean make up the rest.
Tesla also sells a smaller, less expensive version in the U.S.. But the big battery version gives the car a range of about 265 miles per charge and is the automakers’ more popular choice.
“This pricing structure is something of a risk for Tesla, but we want to do the right thing for Chinese consumers,” the company said in a statement Thursday. “If we were to follow standard industry practice, we could get away with charging twice as much for the Model S in China as we do in the U.S.”
Chinese officials, however, have criticized foreign companies of gouging, especially when it comes to luxury or lifestyle goods.
Mercedes-Benz, for example, prices its top cars at about double what they sell for in the U.S.
“We want to treat our Chinese customers just as well as we’d treat customers in any other country,” Tesla said.
It also is smart business.
China is the biggest, and fastest growing, auto market in the world.
Car companies sold nearly 22 million vehicles in China last year, a 14% gain, according to forecasting firm LMC Automotive. That compares with the U.S., the second best car market globally, where automakers sold 15.6 million vehicles, a nearly 8% gain.
Tesla already is experiencing strong demand for its luxury electric car in the U.S. and Europe, said Elaine Kwei, an analyst at Jefferies Group, the investment house.
The automaker sold 22,450 cars last year, about 1,000 more than expected as it ramped up manufacturing at its factory in Fremont, Calif.
“Although the company declined to break out international sales, we estimate roughly 2,000-2,500 were delivered outside of the U.S.,” Kwei said.
Tesla Chief Executive Elon Musk has said the company will launch sales of its Model X, an electric SUV, later this year and plans a third-generation electric car, which will start at about $35,000 within three years.
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