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Tesla Motors Inc Shanghai Show Conceals China Pain

Tesla Motors inc (TSLA) Model 3

Tesla Motors Inc (NASDAQ:TSLA) is hitting the Shanghai Auto Show for the first time, hoping to get some positive press for the Model S P85D as the company seeks to boost sales in China. Earlier this year, Tesla fired its Chinese sales team after revelations that they had been selling the car as difficult to charge.

Elon Musk Tesla

Tesla Motors stock has stumbled in 2015 on worries that the company’s sales might not reach expected targets in 2015. The company’s sales in China, which last year promised to fuel much of the growth promised by CEO Elon Musk, appear to be crumbling and the appearance of the Model S at the Shanghai Auto Show, which takes place in the National Center for Exhibition and Convention from April 22 to April 29, is unlikely to do much to alter that trend.

Tesla Boosts China reach

During a visit to China earlier this year Tesla Motors CEO Elon Musk told media, “China is the only place on Earth that we have excess inventory.” He was quick to blame that inventory on speculators ordering cars and then refusing to take delivery when it seemed secondary market prices wouldn’t be excessive.

The Chinese government offers subsidies to those buying electric cars, but those subsidies cannot be attached to imported vehicles. Mr. Musk said during his China visit that the company plans to bring a production facility to the country in the next three years.

Tesla Motors sees competition in China

While Tesla Motors seems content with cycling its success in the luxury sedan market into a bountiful mass market opportunity, companies in China are starting from the bottom up, and they’re seeing resounding success.

China is a country in which most people have never owned a car. The market is not populated with presuppositions about the way cars burn and regain energy. That might make adoption of electric motor driven vehicles a better prospect. Tesla Motors will, however, have to compete with companies like BYD, which is showing its Song offering at the Shanghai Show.

The Song is an SUV concept, a reminder of the delays that Tesla Motors has faced with its own Model X SUV variant. It’s not entirely electric, instead featuring a hybrid petrol/electric platform, possibly a better solution in a country without a massive Supercharger network.

BMW will also feature its hybrid SUV the X5 xDrive40 at the Shanghai Auto Show.

Tesla struggles in Asia

The Tesla Motors struggle to gain customers in China is hurting the company’s medium term prospects, and encouraging shareholders to reconsider their positions. Since the start of the year Tesla Motors shares have lost 7% of their value.

Tesla says it sold more than its 10,000 target vehicles in the first three months of 2015, but there are questions about the financial impact of those numbers. The company will answer that, and more, when it presents its first quarter earnings in the first week of May. Expect China to feature prominently in the course of the company’s conference call to discuss those numbers.

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