With racing and music events, Tesla gets over market allergy in China

SHANGHAI / SAN FRANCISCO (Reuters) – Tesla Inc ( TSLA.O ) has always shown disdain for marketing, with CEO Elon Musk boasting that his company does not advertise, instead spending the money there would have used to develop products.

But in China, the world's largest electric vehicle market where Tesla is geared up for a major sales push , that tune has begun to change as the car manufacturer promotes racing events, showroom parties with DJs and a variety of Chinese Tesla chat app stickers.

Example: Wang Yubo, a 30-year-old marketing manager and Tesla car owner, was invited by the company to burn his driving skills on a race track in Shanghai this month.

"I learned to push Model 3 to its limit," said Wang, who writes both enthusiastic and critical blogs about Tesla and occasionally drives his car with friends.

Tesla is expanding its focus beyond products to service, says Leo Liu, head of the company's China Driving School, which aims to teach people to "take full advantage of their cars."

It held three such events for car reporters, social media influencers and a handful of owners in August – one in Beijing and two in Shanghai and plans to expand to other major cities such as Guangzhou and Chengdu.

"We are also thinking of having more difficulty on ice tracks in the winter this year," Liu said, adding that more owners will be invited in the future.

While Tesla has not embarked on conventional TV or billboard advertising, this year, US company China chief Tom Zhu has worked with strategies to increase brand appeal, and has often sought ideas and opinions from marketing and sales experts, sources familiar with the discussions said.

The sources did not have permission to speak to the media and declined to be identified. Tesla declined to comment.

LARGE FACTORY, LARGE PLANS

Musk is currently visiting the country, and on Thursday held a discussion with Alibaba's ( BABA.N ) Jack Ma on an AI industry meeting, although they avoided controversial issues such as the US-China trade war.

Tesla's new effort to reach customers in China comes as the Silicon Valley carmaker prepares to open a major car assembly plant in Shanghai and confront stiff competition in the luxury electric vehicle market it invented.

The company's first foreign plant will start production by the end of the year, and Tesla has said it will be able to build 3000 Model 3 cars a week in the initial stages.

This will amount to 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.

The plant is estimated to have an annual production capacity of 250,000 vehicles after production of the Model Y is added.

"We must learn to manage a larger sales and after-sales system as production grows to a completely different level," said a source. "That's why we're doing these events now."

However, the sources added that Tesla spends far less than what a conventional car manufacturer in China would spend on marketing.

In Tesla's favor, it has been exporting cars to China since 2014 and remains the benchmark with which other automakers in China often compare their electric vehicles when advertising.

The launch of Model 3 for the Chinese market at the end of February also went well, sending Tesla's China revenues up 42% to $ 1.5 billion in the first half – equivalent to 13.5% of total sales.

But Tesla in China does not have the first highway in fully electric vehicles it had in the US market when it debuted the Model S in 2012.

Chinese startup Nio Inc ( NIO.N ) sells two first class all-electric SUVs, Jaguar has launched is I-PACE SUV and BMW ( BMWG.DE ) has its i3 hatchback and i8 sports car. At the end of the year, Audi will have two all-electric SUVs on the market while Daimler's ( DAIGn.DE ) Mercedes will have one.

The U.S. firm also does not expect Musk's cult status to drive sales to the same extent as it does elsewhere, the sources said.

Most Chinese do not have easy access to his Twitter feed followed by nearly 28 million, although Tesla translates some of his less controversial tweets into the Weibo account.

In addition to chat app stickers expressing different emotions – a market strategy also used by other automakers – Tesla collaborates with Tencent ( 0700.HK ) QQ Music streaming service in arranging parties with DJs at showrooms.

Both marketing tactics are just China development, the sources said.

Social media users have noticed a lot more activity on Tesla's Weibo account in recent months, while the company has also held several roundtables with reporters and Internet influencers throughout China since July.

According to sources, executives explained pricing strategy and expansion plans for its charging network and said they wanted to improve communication with the audience.

In the United States, on the other hand, Tesla rarely gives media access to its executives beyond revenue calls and product launches.

"Tesla has finally realized the importance of adapting to China," Wang said. "Given time, it will be more mature."