Tesla hits a bump at Shanghai auto show

Plant deal signed

Tesla cars are highly popular in China, accounting for 30 percent of the company's sales globally.

Three years ago, the authorities, customers and analysts enthusiastically greeted the company's decision to build its first overseas plant in China.

Tesla signed a deal with the Shanghai government in 2018, becoming the first international carmaker to build a plant in China, months after the country announced it was further opening up its auto industry.

With loans from local banks, work started on the $2 billion plant in January 2019. Within nine months, it began trial operations, but without Musk taking to a sleeping bag in the factory to supervise progress, as he has frequently done in the United States.

Tesla said it was about 65 percent cheaper to build the plant in China than an equivalent facility in the US.

In an interview with reporters when trial production began, Tao, the vice-president, said the company had made the correct decision.

"Thanks to the outstanding business environment in Shanghai, many of our innovative ideas have become realities," Tao said.

Musk is happy with Tesla's operations in China, particularly the Shanghai factory, which he describes as a "template for future growth".

Yale Zhang, managing director of consulting company Automotive Foresight, which is based in Shanghai, voiced great expectations for the company before it started production locally, saying it would help spur growth throughout the sector.

He said Tesla would help force incompetent manufacturers out of business－some of which have been relying too heavily on government stimulus packages－and inspire serious and ambitious companies to do a better job.

Chinese electric vehicle startups continue to be billed as Tesla rivals by international media, and the company has also done a great deal to boost the sector's appeal.

However, Chinese rivals are doing a much better job in terms of customer relations.

Take Nio for example. Some 50 percent of its sales are due to recommendations from people already owning vehicles made by the company.

Last year, despite the COVID-19 pandemic, Nio held about 100 events, where executives from the company sat down and talked with vehicle owners. Questions were answered by the company's founder and CEO William Li and Nio President Qin Lihong.

When Nio's 100,000th vehicle rolled off the assembly line this month, Li said, "The decisive factors in this industry are how good your products and service are. We will increase our investment in research and development and service."

Technology companies, including Huawei, are joining the competition and are expected to eclipse Tesla in terms of driver-assist functions.

The first vehicle to feature Huawei's operating system, chips and autonomous driving solutions was shown at the Shanghai auto show this month.

A video clip showed the model navigating through urban traffic without the help of a driver. Named Huawei Inside, the cars will be delivered from the end of this year.

Xu Zhijun, deputy president of Huawei, said the vehicles can operate safely for 1,000 kilometers, "much better than Tesla's".

International manufacturers are speeding up efforts to introduce their electric cars to China.

As the protester was dragged away from Tesla's booth, Volkswagen Group China CEO Stephan Woellenstein was delivering a speech in Chinese, presenting the latest electric vehicles made by the company.

In the same pavilion, Volkswagen's premium arm, Audi, reaffirmed its ambition to launch a "golden decade" with its local partners in China. An electric SUV concept named after the city of Shanghai was a highlight of its booth.

Also on April 19, General Motors' Cadillac debuted its LYRIQ crossover in Shanghai, which features Super Cruise hands-free driver assistance, including lane change on demand.

The company said the system can be used on nearly 300,000 km of highways across China, which is the brand's largest market worldwide.

Felix Weller, a senior executive for Cadillac's operations in China, said the model would be delivered early next year.

Ford, the second-largest vehicle maker in the US behind GM, launched its electric Mustang Mach-E early this month. The company said its main rival is Tesla's Model Y.

Roy Lu, director of the Gasgoo Auto Research Institute, a think tank for the industry, said Tesla is pushing potential customers away.

"The market is so competitive, and Tesla shows no respect for car owners who complain about its vehicle quality. Surely its sales and reputation will be hurt," Lu said.

Tesla's troubles in China underscore a problem that some of the company's senior executives have acknowledged, although the difficulties mainly relate to its North American business.

Tesla Chief Financial Officer Zach Kirkhorn told investors in January, "Service expansion is really important to the future strategy of the company."