Tesla plays the environmental angle in China

Electric carmaker Tesla's plan to spur sales in China could be helped by the Chinese government's push for clean energy.

Zheng Yuhuang, a marketing professor at Tsinghua University and a member of the Association for Consumer Research, sees a bright future for Tesla's expansion in China, because the Chinese government has developed several policies to encourage consumers to buy clean-energy vehicles.

The automaker announced on Christmas that it would help Chinese buyers in Beijing, Shanghai and Hangzhou trade in theirold cars if they buy a Model S starting at $104,000.

"This program aims to encourage more Chinese customers to replace their ecologically unfriendly diesel and gasoline cars, to eliminate its harm for the environment," said Wu Xiaopei, sales adviser for Tesla (China), who noted that the Model S is Tesla's first all-electric model.

"We have already received many inquiries about the trade-in program from customers, but they still take a wait-and-see attitude to the Model S and not many of them placed order yet," Wu said.

Also, to further dispel the concerns of Chinese consumers for the electronic cars, Tesla should build more charging grid across the country, Zheng suggested.

Tesla, based in Palo Alto, California, works with Chinese car trader Che Yipai to put used cars up for auction with an estimated market price. Tesla will then deduct the value of the sale from the price of the Model S, said Wu. The trade-in process will take no longer than a week, Wu said.

The program applies to all car types, but won't apply to former Model S owners. As a bonus, buyers who trade in their cars for a Model S will get a household charging device installed free of charge.

"It is a right decision for Tesla to launch such a service to draw more attention for its new model in China," Zheng said. "It will spur the company's sales if they could smooth the trade-in process for Chinese consumers."

"The strategy not only lowers the price for Chinese customers to buy the new Model S, but also reduces the impact of endowment effect for buyers," said Zheng, who defined endowment effect as people ascribing more value to things they own.

According to a new policy released in May, people in Shanghai who purchase Tesla cars don't need to pay $15,000 for a license plate and could be exempted from quotas on new registrations.

Although the trade-in program drew lots of attention in China, it is only part of Tesla's efforts in 2014.

zilian@chinadailyusa.com