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Home / Business / Tesla plans expansion of aftermarket in China as Shanghai factory spins

Tesla plans expansion of aftermarket in China as Shanghai factory spins



SHANGHAI (Reuters) – Tesla Inc ( TSLA.O ) plans to double the number of repair and maintenance stores, add around 100 charging stations and renovate showrooms in China as the electric car manufacturer opens up to the Shanghai facility.

Workers working on building materials for a new Tesla showroom in Guangzhou, Guangdong Province, China October 25, 2019. REUTERS / Yilei Sun

The moves mark a departure from Approach Manager Elon Musk announced in March when he said the company would close many of its stores around the world to cut costs.

Tesla had already treated China, the world's largest electric vehicle market, differently than elsewhere. The company and Musk despise open marketing, but in China Tesla has offered racing events and showroom parties.

"Building cars from the Shanghai plant is just the first step," Tesla Vice President Tao Lin said at an industry conference last month in Beijing. "Next time, we have to deliver cars very well to our customers and offer very good after-sales service.

Tesla plans to turn some of its showrooms in China into one-stop shops called" Tesla Centers "which also serve as delivery locations and offers maintenance support, said two sources known to the case.

The sources, who spoke on condition of anonymity because they were not authorized to speak to the media, said the rollout would start in Shanghai and Guangzhou.

In the coming months, the company plans to also doubling service centers to 63 from 29 and increasing fast charging stations by 39% to 362, according to Tesla planning documents seen by Reuters.

"Expanding the service network is very important to increasing customer confidence," said Tesla China general manager Wang Hao , to Reuters, adding that the company would build more charging stations in China next year at a "faster pace."

to prepare for increasing repair and maintenance requirements to avoid complaints, says one of the sources.

Tesla, most of the service centers located in China's coastal regions and major provincial capitals, will open new ones in the northwestern city of Urumqi, the southwestern city of Kunming and "Ice City" Harbin in the north, the documents showed.

The sources warned that plans may change depending on the circumstances.

Tesla's US headquarters did not respond to a Reuters request for comment.

Work to increase its physical presence in China comes as the carmaker has started trial production at the $ 2 billion Shanghai plant, its first foreign plant, ahead of mass production in late December.

Tesla has said that it will be able to build 3000 Model 3 sedans a week in the initial stages. There are almost four times the number of imported Model 3 cars sold in China per month this year, according to figures from research firm LMC Automotive.

RISING COST BURDEN

The expansion plan is likely to increase the financial burden on Tesla, which has been burning cash due to large losses and capital expenditures.

Tesla has had negative free cash flow every quarter, but five over the past decade, but positive free cash flow of $ 371 million in the three months ended September, thanks to record deliveries and reduced costs.

It was not immediately clear how much Tesla needs to expand to expand its sales and after sales network in China.

Tesla operates around 48 showrooms in mainland China. In contrast to BMW ( BMWG.DE ), Daimlers ( DAIGn.DE ) Mercedes Benz, and Audi ( NSUG.DE ) who want electric sports commercial vehicle models in China at the end of this year, all having more than 500 sales outlets there.

Although Tesla may not have as many showrooms as its rivals, it should have more than it does today, experts said.

"Chinese consumers are willing to investigate cars in a physical store, so car manufacturers must have a certain store network in different locations," said Cui Dongshu, Secretary General of the China Passenger Car Association.

Maintaining the growth momentum in China has become even more crucial for Tesla, as US revenue fell 39% in the third quarter, the first decline in more than two years. In contrast, sales in China increased 64% to $ 669 million.

A Tesla sign is seen at the second China International Import Expo (CIIE) in Shanghai, China November 5, 2019. REUTERS / Aly Song

Tesla also expands labor and sales force in China: It has held several hiring events in Shanghai, Beijing and Shenzhen for sales and delivery staff in recent months, according to recruitment ads posted on social media.

At a Tesla service center in Beijing, customers said that more maintenance and charging systems would encourage them to drive longer.

"It's definitely good. If that's convenient enough, I'll drive the car to more cities, "said Niu Siliang, a 60-year-old retired man who owns a Model X-SUV.

Reporting by Yilei Sun and Brenda Goh in Shanghai, additional reporting from Beijing newsroom; Editing by Miyoung Kim and Gerry Doyle

Our Standards: Thomson Reuters Trust Principles.

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