STEEP Analysis
Political
The Chinese government has set high goals when it comes to electric vehicles. Elon Musk has himself been quoted on the willingness of the Chinese government to welcome electric vehicle manufactures. This is something that have materialized itself in Tesla buyers receiving free license plates in Shanghai and Hangzhou, with more cities possibly following soon. A good government relationship will be essential for Tesla to achieve success in China. Not only to make the total price more compatible, but also in the process of expanding the Charging network, a good relationship with the government will be useful in order to get the licenses needed.
Even though there have been examples of Tesla owners receiving free license plates from the local government, the subsidies are still likely smaller for Tesla as a foreign player then it is for local manufacturers. This can harm the competitiveness over time but for now Tesla’s technology is superior and therefore Chinese are likely to be willing to pay more for this quality. However, Daimler and BMW have both Chinese joint venture production partners. Something that makes them eligible for more governmental subsidies and therefore extremely competitive on price. As of today, the models coming out of these partnerships are not direct competitors of Tesla but over time the combination of European quality and Chinese subsidies become a substantial threat.
(40, 41, 42, 43)
Economical
China is the world’s largest car market and is soon expected to surpass US as the world’s largest Luxury car market. This shows the huge potential in the Chinese market for any car manufacturer including Tesla. This also attracts many other companies that might target the same customers as Tesla. However, with a still rapidly growing market this will still be room for both Tesla and other competitors. (44)
Environmental
Both the Chinese government and the Chinese public have shown signs of moving towards an increased focus on sustainability and environmental friendliness. They have recently set aggressive environment goals for the coming years. As mentioned earlier, this has resulted in increased governmental support for green technology in the car industry, which will benefit Tesla. (45)
Social
The impact of the Chinese growth on the environment for the last 20 years, increased the focus on environmental friendliness among Chinese consumers. Chinese are becoming more aware of the environmental impact of their consuming. For Tesla, this is an opportunity to focus on, since they are one of the few producers of premium electric vehicles.
A McKinsey report on Chinas premium car market states that 26% of consumers surveyed expressed their interest in green technology. This follows the increasing “buy green” trend among Chinese consumers. These trends are promising for Tesla.
According to research TNS did among luxury car providers and customers, Chinese luxury consumers have changed recent years. They value brands with a story and expect a higher level of service than before. They prefer customized products and superior customer service.
There are also other preferences Tesla should be aware of in the Chinese market. Among other luxury car providers there is a trend to launch their models in special editions; specially targeting the Chinese market. Preferences are typically larger or longer models to accommodate Chinas large chauffeur culture. For the long term, this can be something Tesla also has to take into consideration in order to stay competitive. (46, 47)
Technological
One of the main reasons why electric cars are not yet a trend in china, is the lack of a charging station infrastructure throughout China. This is an issue that Tesla needs to address. The process has already started with both Tesla and BMW finding local partners as China Unicom and State Grid, to help them expand the current infrastructure. This development is likely to continue as more of the large automobile manufacturers invest in electric technology.
Another important technological aspect will be the battery performance. Tesla is already in the forefront of this development and has some of the best battery ranges in the industry. Also, with their coming mega factory, Tesla will be able to reap economies of scale on their production and therefore offer more affordable alternatives.
The quality and the technology on Chinese EV offerings have historically not been sufficient to persuade the public to go buy electric vehicles. This is reflected by sales from 2013, which is just above 16 000 electric vehicles sold in the Chinese market. Sales of electric vehicles are slowly growing and will likely surpass 20 000 units sold in 2014. This thanks to launches of electric vehicles from western brands like BMW and Tesla. (48)