Tesla’s aspirations in China took a major blow over the weekend, after the government ordered almost all of its cars sold in China (more than 285,000 of them) to be repaired to resolve safety issues.
The State Administration for Market Regulation said in a statement on Saturday that the operation involved 211,256 domestically produced Model 3 and 35,665 imported vehicles, as well as 38,599 domestically produced Model Y. The California-based automaker only began delivering Model Y sports utility vehicles in January, so the recall will affect almost all drivers who buy one.
The Chinese agency stated that the vehicle’s autopilot system can be activated automatically and may cause a crash due to sudden acceleration. In most cases, it should be possible to repair it remotely by updating the car’s active cruise control function online. Tesla will upgrade the software for free.
Although Tesla apologized through its official Weibo customer support account and stated that it would “continue to strictly follow national requirements to improve safety,” the recall is a series of embarrassing setbacks for the company in China. Protests and a series of crashes that went viral at the Shanghai Auto Show in mid-April have angered the public’s perception of this electric car pioneer. Some local governments and official agencies are reviewing their employees’ ownership of Tesla for fear of these. Cars pose safety risks.
In March of this year, Tesla was barred from entering some military installations and residential areas due to concerns about built-in cameras. Tesla took immediate action to assure the authorities that any data collected in China is stored locally.
Unfortunately, the required software fixes affected Tesla’s Model Y. This SUV crossover has a mileage of up to 594 kilometers (369 miles) and is seen as enabling Tesla to target a larger customer base in the world’s largest electric vehicle and automotive market.
CEO Elon Musk has said that the sales of Model Y are likely to exceed all other cars it produces. Just this month, the China Passenger Car Association predicted that due to government regulations, people will be more concerned about larger and more spacious cars. , Especially as the interest of seven-seater cars increases, parents have to have more children.
Tesla’s Model Y electric car is outside the showroom of the Shanghai automaker in China on Friday, January 8, 2021. Chinese Tesla customers who want to obtain a new locally-made Model Y are facing a longer wait, which shows that the initial demand for Model Y is strong for Shanghai-made SUVs.
Credit Suisse stated in a report last week that one of the main downside risks to Tesla’s $800 target price is Model Y difficulties and insufficient international market demand. Tesla’s shares traded on Nasdaq closed at $671.87 on Friday, a decline of about 5% since January. They soared by 743% last year.
Credit Suisse analyst Dan Levy wrote that Tesla’s delivery time in certain locations in China “has been shortened from 39 days to 33 days-this may indicate a reduction in the number of orders converted into sales” . However, despite the recent negative news, some customers have changed brands, “there are still sufficient Model Y orders to support continued sales,” Levy said.
Last year, foreign brands accounted for about 37% of China’s new energy vehicle sales, and so far this year is 57%. China is Tesla’s second largest market after the United States, and it now exports Chinese-made cars to Europe from its Shanghai super factory. But a small number of fast-growing local upstarts threaten its strong position, especially Weilai Automobile and Xiaopeng Automobile. In the mass market, cheap, fully functional electric vehicles produced by SAIC-GM-Wuling Automobile Co., Ltd. are winning the favor of local buyers.
The Chinese-made Model Y starts at approximately US$53,000, and sales in May more than doubled from April. The data in April was lower than that in March because some production lines at Tesla’s Shanghai plant were suspended for two weeks for maintenance and adjustments.
“Once Model Y goes into full production, we may see a ratio of close to 2 to 1 compared to Model 3 sedans,” said Tu Le, managing director of Beijing consulting firm Sino Auto Insights earlier this month. “Chinese consumers like SUVs and sedans. Crossover. I think Model Y will perform very well by the end of this year.”