It’s no secret that electric-car maker Tesla Motors is ramping up its efforts in China. Despite some initial challenges in the country when the company launched in the market in 2014, it still believes China could be one of its largest vehicle markets “within a few years,” according to its most recent 10-Q filing. And an update from Musk this week on Tesla’s plans in China, as well as a look at sales in Hong Kong, suggests it is as eager as ever to serve these important Asian markets.
Aiming to secure a factory location this year Tesla “aims to lock down manufacturing plans finding a local partner and a location for the plant — for the local market by the middle of this year,” wrote Engadget’s Richard Lai on Monday.
The company plans to launch a factory in China “as soon as a year after” the Model 3 launch, which is set for late 2017, Musk said on Twitter last October. Securing a local partner and a location for its plant by the middle of this year would give Tesla plenty of time to meet this time frame.
Musk hopes China will nix its “prohibitively high” auto import duties for the Model 3, making “a special category for EVs,” he explained last year on Twitter. Musk explained that these are natural moves for the company in order for it to “improve in-market affordability.”
A China factory will be built to serve local Chinese demand and the company will continue to make cars and batteries in California and Nevada.
Rising investments and rising demand
Following its poor start in China in 2014, there was quite a bit of uncertainty about Tesla’s potential in the country last year. But a look at Tesla’s commentary on the market throughout 2015 suggests it experienced considerable growth in the market in terms of sales, demand, and investments.
On a quarter-to-quarter basis, orders in Q2 “doubled” and orders in Q3 “increased substantially,” the company noted in its second- and third-quarter shareholder letters. Going forward, Tesla said in its third-quarter shareholder letter that it expected “order growth in China to remain strong.”
Along with this rising demand, there are now over 340 Superchargers and 1,600 Destination Chargers in the country.
One area of investment for the company in China has been with its retail stores. In August 2015, Tesla had just one retail store located in a high foot traffic area in the market and said it planned to have five by the end of the year. With 15 stores in the country now, the company appears to be exceeding its plans for a retail expansion there.
Tesla’s investments in Hong Kong, where it currently has three retail stores, are also surprising. Lai provides a glimpse of the company’s robust charging network in the market, along with a rare breakdown of sales for the region:
Hong Kong in particular has 42 Superchargers, making it the city with the highest density of Tesla’s rapid charging stations; this is on top of the 75 destination chargers there. It’s no wonder that last year the company managed to sell 2,221 Model S in Hong Kong alone, which made up over 80 percent of the local electric vehicles that year. To put things into perspective, that’s also 4.39 percent of Tesla’s total global shipment in the same period.
This is considerable progress considering the company didn’t launch in Hong Kong until the second half of 2014.
China and Hong Kong both look poised to represent key catalysts for Tesla in 2016.
The next billion-dollar iSecret
The world’s biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn’t miss a beat: There’s a small company that’s powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.
Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
