Research Paper on Tesla in China: Challenges of EV Charging Infrastructure

Introduction

Despite Tesla's ambitious aspiration to conquer the Chinese market, particularly with the introduction of the electric vehicle (EV) in the Chinese market, there have been significant challenges facing the company. The main challenge facing Tesla in the Chinese market is the country's underdevelopment of the supportive charging infrastructure that is critical for the electric vehicle. In 2014, Tesla was convinced that there would be enough charging infrastructure for the EVs since China's government confirmed its support for the electric vehicle industry to the extent that the Chinese State Council exempted EVs from the 10% tax levied on new vehicles (Teece, 2019). However, a 2014 survey by A.T. Kearney found that the issue of lack of charging stations was a significant issue affecting the EVs buyers. Comparatively, there are approximately 57,000 charging stations in the United States as of 2018, which is not a major problem compared to the Chinese market.

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Another major challenge facing Tesla in China, according to Elon Musk, is the issue of perception or consumer reluctance (Sachon et al., 2016). Different from the United States market, where there is high consumer reluctance as a result of the perceived issues with reliability, safety, and access to charging stations. Tesla sees this as a perception problem since it makes it known that there are no such problems with the electric vehicle (Hawkins, 2018).

However, Tesla can overcome these obstacles. For instance, since the major problem facing Tesla in China is the charging infrastructure, there are significant developments in the Chinese market as Tesla is partnering with other Chinese firms to expand the charging network (Teece, 2019). On the other hand, Tesla can overcome the perception problem since the company is now looking at producing cars in China. This move is expected to reduce customer reluctance, which will help Tesla overcome the challenge.

A Case to Start Manufacturing Tesla's in China

Despite the occurrence where all the Tesla cars sold in China today were made in the United States and shipped to the Chinese market, a case to manufacture Tesla's in China could be made. First, since all the Tesla cars sold in China are imported from the United States, it means that there are subject to the Chinese market tariffs and the shifting levels of the trade between different countries (Hettich & Muller-Stewens, 2017). As such, manufacturing Teslas in China would mean that the company could be able to sell more in China at lower prices regardless of the shifting trade winds. Second, China stands as a significant opportunity for Tesla since it is the biggest market for electric cars (Gao, Wang, & Wu, 2008). With such an opportunity, it would mean the production of EVs in China would increase sales in the company. Despite the recent challenges in the automotive market and the Chinese market overall, Tesla still represents a tremendous opportunity for Tesla. There have been aims by Tesla to start producing Tesla's in China by 2020 since they have set up a manufacturing factory in Shanghai. In the manufacture of Tesla in China, Tesla aims to ensure that the Shanghai Gigafactory is ready for production as soon as 2019, with its company's original factory located in Fremont, California (Tesla, 2019).

Tesla's Target Market in China

In the automobile industry in China, Tesla should develop a proper target market. Mainly, Tesla should focus on people between the age of 20-40 as a way to expand its target customer base. Within the age group, as a target market, Tesla could divide it into three significant sections; eco-friendly, tech-savvy, and entry-level luxury customers. In the eco-friendly category, Tesla should target young people between the age of 20-25 since it is more affordable and flexible. Within the tech-savvy group, Tesla should focus on the people between 25-34 while, with the entry-level luxury customers, they should focus on the populations between 35-40 age bracket.

Furthermore, Tesla should differentiate from other luxury electric vehicle makers such as BMW's i3 by adopting various changes and developments. For instance, since Tesla is focusing on intensive growth strategies, the company should differ from other makers by taking Michael Porter's model generic approach, which could deliver broad differentiation (Voigt, Buliga, & Michl, 2017). With the generic strategy, it seeks to develop products different from other competitors. For example, with the extensive differentiation offered by the generic approach, Tesla can increase focus on research and development (R&D) to ensure that the market remains satisfied while at the same producing unique EVs that are different from the competitor.

Within the generic strategy offering broad differentiation, the company can remain differentiated from other companies with the introduction of developments such as renewable energy solutions. Such invention facilitated by the generic strategy will maintain that Tesla remains in the hell of innovation as it produces electric vehicles. Within the intensive growth strategy by Tesla, the company should differentiate from other EV makers by focusing on product developments. Through product developments, Tesla should include the intensive approach that will aid the differentiation of the products from other makers by helping the company maintain a focus on unique high-technology automobiles with advanced features that will attract customers as well as remain differentiated from other makes such as the BMW i3.

Further, Tesla should differentiate from other luxury makers in the EV industry by focusing on buyer needs. By focusing on customer needs, particularly with the high-end electric vehicles, Tesla will develop advanced technology while at the same time maintaining sustainable environmental practices according to consumer preferences. By this, it should help Tesla remain differentiated from the other luxury and high-end electric vehicle makers.

Strategy Marketing Actions Proposals

Even though Tesla is facing significant challenges in its Chinese market, the company remains ambitious and focused on its prospects to acquire the Chinese automobile market and dominate with the sale of electric vehicles. For Tesla to realize its ambitious sales forecasts in China, Tesla could use the transactional marketing strategy. Within the transactional marketing strategy, sales represent the most challenging work whereby, the retailers of a product in this the Tesla electric vehicles motivate and encourage the buyers to shop when there are offers, promotions, discounts, huge events, as well as shop with shopping coupons. In different ways, this strategic marketing action increases the chances of sales by motivating the target audience to purchase the EVs when there are on offer or affordable. Also, within this strategic marketing strategy, it could help Tesla realize its ambitions in china in terms of sales since it will aid in the company interact with other retailers. For instance, with the involvement of Alibaba's 11.11 Singles Day, Tesla will be able to take such opportunities since it is among one of the world's biggest online shopping event.

Moreover, to realize its sales targets in the Chinese market, Tesla could use internet marketing. With the internet as strategic marketing activities, it is also defined as cloud marketing, whereby products are shared online and promoted through different platforms under multiple approaches. In China, more than 55% of the population is actively using the internet, with approximately more than 800 million web users. As such, it means that people can access information online quickly and to large populations. With the utilization of the internet marketing strategy, Tesla can conquer the Chinese community by ensuring that they market electric vehicles through different approaches such as social media advertisements (Tesla, 2019). Since the aim is to gather more sales, internet marketing could be modified by using it to create a proper relationship with the people and building a sense of trust. As discusses earlier in the paper, concerning the challenges of customer reluctance, this will help ensure that the customers acquire all the information they need to know about Tesla creating a sense of trust. This will aid Tesla to achieve its sales target in the Chinese market.

Tesla can use diversity marketing to acquire its sales target by attracting a larger market share. In diversity marketing, it caters to diverse audiences by integrating and customizing the different strategic marketing actions. Since this cover's aspects such as attitude, beliefs, and views, it means that a broad market will be accessible. Inclusivity in china has been one of the economic and social developments in the nation. Thus, individuals from a different culture can help create a diversified market as they connect. In the case of Tesla, ensuring that there is diversity marketing will gather more customers, which is expected to increase sales helping Tesla realize its ambitious sales target in the country.

References

Gao, P., Wang, A., & Wu, A. (2008). China charges up: The electric vehicle opportunity. McKinsey&Company. October.

Hawkins, A. J. (2018). Electric Cars Still Face a Big Hurdle: The Charging System.

Hettich, E., & Muller-Stewens, G. (2017). Tesla Motors. Business Model Configuration, Case Study Update: From Tesla Motors to Tesla.

Sachon, M., Zhang, D., Zhang, Y., & Castillo, C. (2016). The Chinese Automotive Industry in 2016. IESE Business School, Universidad de Navarra.

Teece, D. J. (2019). China and the Reshaping of the Auto Industry: A Dynamic Capabilities Perspective. Management and Organization Review, 15(1), 177-199.

Tesla. (2019). About Tesla | Tesla. Retrieved 3 December 2019, from https://www.tesla.com/about

Voigt, K. I., Buliga, O., & Michl, K. (2017). Driving Against the Tide: The Case of Tesla Motors. In Business Model Pioneers (pp. 187-198). Springer, Cham.