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Tesla Motors Inc (NASDAQ:TSLA) Lobbies Obama for China Tax Cut

Tesla Motors Inc TSLA China

Tesla Motors Inc has had issues with growing sales in China, but the firm is hoping to change that in with the help of President Obama. The Wall Street Journal reports that Tesla Motors is planning to lobby Obama to discuss U.S. auto sales in China when Chinese President Xi Jinping comes visiting the next month. Raising the issue of U.S. foreign sales in China might be just what Tesla needs to unlock sales growth in the Chinese market.

Tesla Motors Inc TSLA China

Foreign carmakers in China must have local partners to avoid import taxes, a policy that makes it harder for American automakers to do business in China. It also exposes them to weak links that might be used by rival firms of Chinese origins. Tesla Motors spokesman Ricardo Reyes, says the policy is not fair to American players in China. In his words, “The China-owned companies are not expected to sell controlling stakes to American companies and are free from other trade hurdles that we face.”

Tesla Motors long road to China

Tesla had high hopes for China when it wanted to enter that market. In February 2014, Elon Musk unveiled his plans to expand into China. It appeared that the Chinese market was also receptive of Tesla’s entry as the Chinese government offered huge subsidies to Model S buyers in order to improve the air quality in the country. Musk was confident that China was a done deal when he said, “It will be unlikely that we will be able to satisfy demand in China this year”.

One year later, Tesla is yet to unlock the sales growth in China despite all its optimism. To start with, in 2014, the firm sold only 2,499 Model S units in China for 2014, this marks about 8% of its 31,700 units in global sales. The reported sales underperforms Tesla Motors plan to have about 35% of its global sales come in from China.

Tesla’s problem in China has been traced to a number of factors such as range anxiety, charging solutions, and cultural issues relating to the size of the cars. Tesla Motors is already making moves to solve its China problem and it is planning to launch the Model X in China in the first half of 2016.

Dealing with Chinese competition

Despite Tesla’s initial romance with the Chinese government, it appears that Beijing doesn’t shy away from giving its local firms an edge over foreign players. Reyes says, “The requirement that Tesla Motors establish a joint venture for local manufacturing and other obstacles to our activities, such as much higher import duties in China compared to the United States, put American car companies at a significant disadvantage.”

Youxia is one of the Chinese firms that want to kill Tesla’s push in the Chinese market. It was reported that Youxia is set to release car that could as well be a Model S for all intents and purposes, but at the price tag of Tesla’s upcoming Model 3.

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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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