China’s Car Sales Continue to Soar
In an attempt to slowdown the growth rate of vehicles on the road, Beijing, Shanghai, Guangzhou, Tianjin and Guiyang have introduced car buying limitations. With more than 18.44 million people taking driving tests in 2013, the auto market in China still has huge potential for growth, despite restrictive measures imposed by government, which are expected to be adopted by more cities in the near future.
In this market of intense competition, US luxury electric car maker Tesla has decided to reduce its mark-up in the Chinese market in order to capture more market share. Analysts have noted that this decision may move the prestigious brand out of the top tier, due to the mind-set in China that higher prices mean more prestige. In a blog post entitled A Fair Price, Tesla noted that if the company chose to follow ‘standard industry practice’ it could charge twice as much as the US price for their high-end Model S electric car, going on to say that they were going to do things differently. Some analysts have expressed their opinion that the strategy of charging a lower price may deter upper income buyers who equate a high price tag with prestige, but Tesla appears to be prepared to take that risk as they distance themselves from automakers charging premium prices in China – a situation which led China Central Television to state last year that the Chinese market had become a “treasure bowl” for international carmakers.