Tesla to Test China Demand With Model S Price From $121,000

Jan 23, 2014 9:55 am ET

(Updates with today’s trading in fifth paragraph.)

Jan. 23 (Bloomberg) -- Tesla Motors Inc. will sell its battery-powered Model S sedan in China from 734,000 yuan ($121,280), as billionaire founder Elon Musk prepares to test demand for electric vehicles in the world’s largest auto market.

The price for the imported Model S in China, equipped with a premium 85 kilowatt hour battery pack, puts the car in the same bracket there as Volkswagen AG’s Audi S5 sedan and Bayerische Motoren Werke AG’s 5-series GT sedan, according to Autohome, a car-pricing website. It’s also 50 percent more expensive than in the U.S., where the equivalent model sells for $81,070, according to Tesla’s statement.

“The price of a Model S in China is the same as the price of a Model S in the U.S., adding only unavoidable taxes, customs duties and transportation costs,” the carmaker said in a statement on its website. “If we were to follow standard industry practice, we could get away with charging twice as much for the Model S in China as we do in the U.S.”

Foreign companies have come under scrutiny in China for their pricing practices, with state broadcaster China Central Television producing reports accusing companies from Tata Motors Ltd.’s Jaguar Land Rover to Starbucks Corp. of overcharging consumers in the country.

“It’s a good price,” John Zeng, Shanghai-based managing director of researcher LMC Automotive, said of Tesla’s Model S. “This should attract premium customers to try this product, especially in big cities.”

Tesla fell 0.7 percent to $177.25 at 9:48 a.m. New York time. The stock more than quadrupled last year.

Electric Vehicles

Tesla’s entry is also being closely watched by other automakers that have been trying to convince local consumers that electric vehicles are worth the hassle. China is lagging behind its target to have 5 million alternative energy-powered vehicles by 2020 because of a lack of charging stations and high costs, even amid mounting public concerns over worsening air pollution.

At Tesla’s flagship store in a Beijing mall populated by high-end boutiques such as Van Cleef & Arpels and Mulberry, hotelier Kevin Chen says he’s interested in buying the Model S to bump up his green credentials.

“I heard about the car from my friends overseas and we are very interested in getting one,” said Chen, a 28-year-old hotel businessman. “Smog in China is getting so bad that we should do whatever we can to help.”

Tesla has received several hundred reservations since it started taking orders in August, Veronica Wu, Tesla China’s vice president, said in an interview in Beijing today. She declined to provide specific figures, saying buyers need to pay a 250,000 yuan deposit to reserve a car.

“We have very high expectations for the China market,” she said. “To a large extent, China will be a growth engine for Tesla in the future.”

--Alexandra Ho and Tian Ying. Editors: Chua Kong Ho, Subramaniam Sharma