Tesla has a bright future in China despite Q1 net loss

The world’s leading electric vehicle manufacturer Tesla reported its Q1 results on Wednesday. The company generated USD 1.6 billion in revenue with a net loss of USD 282 million in the quarter. Despite the challenges that Tesla is facing, its sales in China are staying strong.

In Q1, Tesla produced 15,510 EVs, an increase of 10% over Q4 2015. The production of the Model S reached 12,800 units and the Model X reached 2,660 units in the quarter. The company sold 50,580 EVs globally in 2015.

In the first nine months of 2015, Tesla sold 3,025 EVs in China, far behind its expected 10,000 units. This caused Tesla to lower its sales expectations to 5,000 for 2016.

China has a high demand for EVs but its own productivity is limited. This might offer new solutions for Tesla to generate more sales.

According to the Ministry of Industry and Information Technology, in the first quarter of 2016, the production of all-electric vehicles reached 6,300 units in China, a drop of 89% compared to the previous quarter . This is mainly because the government’s policy for the EV industry has not been well-implemented, including a problem with lucrative subsidies for EV customers not finding their way into customers’ hands directly.

Actually, China is taking more measures to support the new energy vehicle industry in order to achieve economic upgrading and environmental protection.

Some local Chinese governments provide subsidies for customers and tax cuts for manufacturers, and even create favorable conditions for building new energy vehicle factories.

Henry Xia, the CEO of Xiaopeng Motors, which landed USD 42 million in Series A financing last month, said that Guangzhou’s government has provided 10,000 square meters of space and RMB 10 million in subsidies to support the development of their factory.

In March, Shanghai’s Municipal Transportation Commission released a new bylaw imposing requirements for environmental protection and energy conservation and offered subsidies for new energy vehicles.

Last month, Beijing’s Development and Reform Commission called for setting up 435,000 charging spots to support what they estimate will be 600,000 new EVs on the road by 2020.

You know what? Chinese customers love Tesla for its price and quality. They even lined up to reserve Model 3s last month.

Tesla’s Model 3 only costs USD 35,000, and Elon Musk, founder of Tesla, said at the Future Transport Solutions conference in Oslo in April that the next generation of Tesla vehicles following the Model 3 will be even more affordable.

In addition, Tesla has begun to build its charging infrastructure in China. Over the last two years, Tesla opened 17 stores in seven major cities, and built 372 super charging spots and 1,200 destination charging spots all over the country.

As Robin Ren, Global VP & Head of APAC for Tesla Motors recently put it at GMIC 2016, Tesla has felt the heat in Chinese market.

“China has been a strong force in helping drive Tesla’s development. Without China, Tesla would not be able to fully realize its global vision in the EV sector,” Ren said.

(Top photo from teslamotors.com.)

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