Despite Tesla’s blowout first quarter earnings, which also subsequently revealed that the company made zero profit from its actual business, that is, to produce EVs, it appears that Elon Musk may be headed for a bumpy ride in China.
The Global Times, a Chinese state-run media organization, on Tuesday published a bombshell review, explaining that despite Tesla’s record earnings last quarter, the company’s otherwise robust Chinese sales are headed for a dramatic turnaround in the next couple of months, due to an ongoing “public relations crisis” that has put the automaker at a “serious risk.” The report went on to add that Tesla’s sales in the communist country “are doomed to experience a sharp fall in the second quarter.”
Tesla has been able to benefit from broad recognition in China’s auto market, particularly in first-tier cities. The automaker’s devotees have been buying into its extravagant brand image and leading-edge intelligent system. However, that fairytale may soon be at its end, as Tesla’s image is in “serious trouble” amid recent protests against the company.
“…The company’s destiny hinges on whether a safety investigation involving a crash in Central China’s Henan Province points to a brake malfunction,” wrote the Global Times. “…If Tesla is found to have hidden quality defects from the public, the company could lose its foothold in the Chinese market, analysts warned.” According to one independent analyst quoted by the Global Times, Tesla’s Model 3, which is largely purchased by medium-end customers who have a lower tolerance for defects, has been the main subject of recent customer complaints that have been dominating headlines.
The ongoing customer complaints, and Tesla’s apparent lack of seriousness in the matter could become problematic for the EV maker. This is because China’s auto market is even more important than its US counterpart, given that the Chinese government provides significantly more incentives and support policies for new-energy vehicles (NEV).
Information for this briefing was found via the Global Times. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.