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Tesla Motors, Inc (NASDAQ:TSLA) EV Ownership in China is Easy, Driving One is Not

Tesla Motors Inc TSLA China

Tesla Motors Inc. has had a tough time in China so far.  The company had high hopes when it entered the market in 2013. In fact, the situation in China is a source of concern for Tesla and its investors and the firm is seeking Obama’s help to solve its China problem. However, it appears that 2016 might be a better year for Tesla in China as some of the government policies are being reviewed in its favor.

Tesla Motors Inc TSLA China

Chinese Paper, Sina.com reports that Tesla Motors will now be added to Beijing’s energy Yaohao (lottery) system this month. The change in policy means that Tesla owners will now have better chances of being able to drive their cars; hence, it would lead to an increase in Tesla’s Chinese sales. You won’t understand why this is good news for Tesla unless you understand the dynamics behind buying and using a car in Beijing and most of China.

Owning a Tesla in Beijing doesn’t mean you get to drive one

Beijing has a population problem, as it is overcrowded – people drive cars, cars take up more space than people, and “traffic congestion” is an understatement for the traffic situation – with huge car traffic (ICEs) comes huge pollution issues. The city government’s plan to reducing traffic and pollution was to reduce the number of new vehicles getting on the roads. Hence, when you buy a car, you have to take part in a lottery in which winners get license plates for their cars to get on the road.

Once each month, the Traffic Management Bureau runs the lottery for car owners on the waiting list. If you don’t win this month, you’ll have to wait until next month. In fact, you can wait for up to six months or one year without leaving the pool if you don’t win the lottery. Statistics shows that in August, only 0.52%, equivalent to 191: 1 ratio in the ballot won a license plate.

Odds now favor Tesla

Your odds of winning the lottery improve significantly if you have bought an EV; hence, people buying EVs had better chances of winning a license plate than people who bought ICEs. However, Tesla was not included in the list of qualifying EVs, and Tesla buyers had to stay on the waiting list with those that bought gas-guzzlers.

Now, Tesla will be added in the list of EVs that qualify for priority placement in the lottery in Beijing. Beijing is a key market for Tesla because of the Chinese wealth is in that city. Tesla can expect to sell more its cars in Beijing now that its odds are better. An increase in the number of Beijing buyers will increase Tesla’s word-of-mouth adverts and the firm can start generating real buzz in China. More so, Beijing’s move might push other cities to start adding Tesla to the list of qualifying EVs.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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