Tesla's China strategy: what's different?

Market entrants must modify their goods to take use of emerging Chinese technology

to succeed in China. Tesla used Chinese manufacturing and supply chain advances to make

the EV (2021). Tesla's brand image satisfied investors' and consumers' need for high-

performance, usable, attractive, and luxury goods.

Tesla's three China goals

Tesla entered China with three goals:

 First, to grow in the world's biggest EV market.

 Second, to avoid China's joint venture requirement.

 Thirdly, to secure its burgeoning EV lineup's intellectual property.

Tesla's China investment was key. Tesla became the first foreign automaker to

operate autonomously in China while keeping 100% ownership. Tesla should not worry

about "forced technology (IP) transfers" of its patents after China changed its Foreign

Investment Law in 2020. Mercedes-Benz, BMW, Ford, Toyota, and other multinational

carmakers have requested this arrangement for years.

Tesla's China strategy

Tesla doesn't advertise in China. It has no marketing department. Elon Musk calls

Tesla's revolutionary marketing technique "$0 Marketing budget". Tesla SEC filings via

Visual Capitalist, Vehicle Cost. Automaker marketing vs. R&D.

Tesla's China marketing approach is unique despite its budget. Tesla prioritises

customer experience (2021). The website has all automobile information and handles car

sales online. COVID-19 requires this. Tesla's Chinese referral scheme replaces sponsored

advertising. Tesla users' reviews encourage new buyers.

Tesla's China marketing relies on Elon Musk's personality. He is a major newsmaker

and active on Twitter. Chinese netizens love and hate Elon Musk.
 To enter the Chinese consumer market, Tesla leverages word-of-mouth marketing.

Tesla makes high-quality goods and depends on users' word-of-mouth marketing.

Finally, Tesla in China needs transparency. Company personnel constantly inform

customers of issue resolution, which builds brand confidence.

1. Tesla Supply and Value Chains

Tesla controls the supply chain from manufacture to distribution, unlike most

conventional automakers. Lowering manufacturing costs ensures corporate viability. Tesla's

supply chain strategy include manufacturing, inventory management, and distribution for

long-term growth (2021).

Tesla controls practically the whole industrial value chain due to its revolutionary

vehicle designs and production method. Tesla's supply chain integration flow chart is below.

2. Tesla's Complicated Battery Management

Battery and charging technologies are essential to EV sustainability. Many customers

avoid EVs because of their low range. EV technology starts with the battery. Tesla

manufactures battery packs to solve this issue. Tesla started by integrating common batteries

into a strong, reliable, and large-capacity battery pack. Tesla utilised mass-produced lithium

laptop batteries because they are cheap, reliable, and have a good supply chain.

Teslas lead long-range driving, thus this worked. The chart below shows how the

battery cell and packing are integrated into EV manufacture.

3. Tesla's Efficient Energy Ecosystem

Tesla understood the need of self-supply. Tesla is building a China-wide energy

supply infrastructure of superstations that generate their own power and charging stations.

4. Retail/Distribution

Tesla owns all dealers, sales outlets, and car repair and maintenance. Traditional

OEMs sell via one-brand and multi-brand dealers. Tesla sells directly, eschewing franchised
dealerships. Thus, the corporation controls customer experience, channel touchpoints, and

data, aiding new product development.

5. Sales/Pricing

China provides EV subsidies, making certain Tesla models cheaper. The Model 3

costs RMB 235,900 (USD 36,500) compared to USD 39,990 in the US. Most dealers can't

sell online, but Tesla can. This sales strategy provides set pricing, so no matter where you

purchase a Tesla, the retail price is the same. Tesla stands alone because other OEMs must at

least make buyers feel like they're receiving value from the brand. Apple feels premium with

this price and distribution approach (Harwit, 2022).

6. Customers

Tesla's market is unique. Most automakers sell economy or specialty cars. EVs are

expensive. Tesla's strategy of delivering an inexpensive mass market EV is supported by its

SUV and cheaper multi-purpose vehicle offerings. Battery and recharging system customers

must match vehicle customers.

Tesla can deliver an uniform product with little market distinction since these market

categories are transnationally homogeneous. Tesla's market segmentation shows its high-end

disruptive innovation methodology.

7. Cost/Value

Tesla must boost product value due to cost pressure from the competitive auto sector.

The firm minimises EV switching costs by providing value-added services via a worldwide

network of retailers, service centres, and Superchargers.Tesla can charge more because of its

powertrain engineering and energy storage expertise. Finally, over-the-air software upgrades

help Tesla goods retain value (Harwit, 2022)..

Tesla's China marketing success:

 Similar techniques failed for other industry participants. Tesla aims to produce a new

automobile faster than competition. They require the fastest, most agile suppliers to do so.

Tesla is creating its own market, unlike its rivals. Renewable energy will power this

enormous plant, which can create half a million Tesla automobiles yearly.

The factory lowers domestic battery prices. Tesla is one of China's most significant

and well-rounded alternative fuel and sustainable transportation providers.

Tesla's China strategy's success

Tesla succeeded because to timing and vision. Tesla was one of the few pure EV

vehicle companies in the mid-2000s and perhaps the first to build a reliable EV drivetrain and

battery pack. The business was the first to bet on lithium-ion battery prices falling for years.

Tesla's distinctive branding helped it stand out and win consumers. Tesla's business model

also addresses Chinese EV customers' main concerns.

 The management team at Tesla was able to accurately predict the future of the electric

vehicle (EV) sector, which made it possible for them to pinpoint the important capabilities

and bottleneck assets that need to be bought or improved (Harwit, 2022).

 It is very necessary for international automakers to have support and licence from the

Chinese government before they can join the China market.

 As with Apple and the consumer electronics business, Tesla was permitted to join the

Chinese market because of the value it contributed to the country's electric vehicle (EV)

industry (Tesla Eyes China as U.S. Output Struggles: EV - ProQuest, n.d.).

 In China, where word-of-mouth travels rapidly under the condition that the product is

desirable to buyers, Tesla's "tactic" of not marketing, which consists of not marketing, was

successful.
 Tesla's success in China may be attributed to its use of direct-to-consumer sales

channels, which enables the company to employ set pricing and immediately address

concerns raised by customers (Tesla Eyes China as U.S. Output Struggles: EV - ProQuest,

n.d.).

 In China, Tesla is not in the lead in terms of market share since the company is up

against fierce competition from local companies that may get greater support from the

government.

References

B. (2021, January 14). Tesla’s Success in China [Video]. Bloomberg.

https://www.bloomberg.com/news/videos/2021-01-14/tesla-s-success-in-china-video

HARWIT, E. (2022). Tesla Goes to China. East-West Center.

http://www.jstor.org/stable/resrep41312

Tesla eyes China as U.S. output struggles: EV - ProQuest. (n.d.).

https://www.proquest.com/trade-journals/tesla-eyes-china-as-u-s-output-struggles/

docview/2071710663/se-2