Facing more and more severe energy shortage and economic pressure, governments and automobile enterprises all over the world generally realize that the replacement of traditional automobiles by new energy vehicles has become a general trend. In order to create a good environment for new energy vehicles, the Chinese government also encourages the development of new energy vehicles through various economic incentives. In this context, the Chinese market has attracted many enterprises to invest and carry out business. Tesla Company cited in this paper is a good example.
As a well-known brand of electric vehicles, Tesla is still in the stage of exploration and development in the Chinese market. Therefore, this report will take Tesla as the case study object, take the literature as the main information source, analyze the problems that Tesla encountered in implementing its business strategy in the Chinese market, and discuss the opportunities and challenges faced by the company, in order to provide reference suggestions for Tesla.
Tesla's business analysis in ChinaTesla places great importance on the Chinese market. It is related to Tesla's own development strategy and the special strategic position of the Chinese auto market. The company believes that China's huge consumer groups will be drawn by the differences and scarcity of products. There are two main types of Tesla's business services in China: automobile sales related business and after-sales service.
Tesla's issue in China market
Promotion strategy ineffectively
Tesla adopted the word-of-mouth promotion strategy in the promotion of electric vehicles. In other words, Tesla abandoned the traditional advertising, relying mainly on social media, blog forums, word of mouth and other means to promote its products. For example, Google President Larry Page and Hollywood famous star Schwarzenegger are Tesla users (Alghalith 2018). They have a lot of fans, which is equivalent to a free promotion for Tesla. And Tesla updates every step of the company's progress every month on the blog. However, in the Chinese market, the way Chinese consumers receive foreign information is limited (Alghalith 2018). Therefore, the promotion of social media through foreign media has little impact on Chinese potential consumers. On the other hand, China's old high-end cars are heavily advertised in China, allowing more people to understand their brands, accumulate market resources and develop potential customers through advertising (Alghalith 2018). Therefore, Tesla's strategy of relying on user word-of-mouth promotion without any paid advertising will make Tesla difficult to be known by more consumers in China.
ThreatsAs one of the largest foreign-funded automobile enterprises in China, Tesla has faced many serious challenges. One noticeable challenge is the fierce competition from local firms in the market. From the perspective of the current market structure, huge numbers of local automobile enterprises in China are responsible for the production and sales of new energy vehicles. That is, local automobile firms domain a strong position in Chinese market. The main reason is the subsidy policy from Chinese government. Dixon (2018) reported that Chinese government has promote subsidies for new energy vehicles from 2016 to 2020. The new energy vehicles which meet the rules can receive subsidies. Actually, most Chinese local electronic vehicles are benefit from this policy. Unlike the local vehicle firms such as BYD, Tesla has no new energy vehicles in the list of subsidies. As a result, customers prefer to purchase new energy vehicles from the local enterprise instead of Tesla because of their lower prices. There is no doubt that the sales volume of the local vehicle firms sharply rises. Demandt (2018) points out that sales of Chinese local vehicle enterprise rose by 5.2% in 2017, but sales of foreign-funded companies were only up 0.8%. Obviously, Tesla has suffered attack because of fierce competition in the market and the price disadvantage. It is reported that BYD which has become the largest seller of electric vehicles in the world sold over 96,000 new energy vehicles in 2016. On the contrary, Tesla only sold 83,922 vehicles (China Hand 2017). This data implies that Tesla has met challenges from competitors.#p#分页标题#e#
Although Tesla has faced various challenges in its business operation, it is still provided with opportunities. Firstly, Chinese people begin to put more emphasis on the environment protection. In recent years, PM2.5 was proved to be a serious factor of diseases. Additionally, as many factories exhaust gas illegally and many mobile vehicles did not reach the exhaust pollution, this situation became more serious. It is reported that China has become the largest gas emission country in the world, overtaking the United States (The Guardian 2015). In order to protect the environment and dispel people’s concerns about air pollution, Chinese government has promote policy to restrict the emission of gas. The implement of this policy had a huge influence on automobile enterprises. As the emission standards have been raised, the traditional automobile manufacturers will be affected. However, new energy automobile market will benefit from it, which means that Tesla gain huge opportunity from this policy. Today, huge numbers of young people have become main consumers to purchase vehicles. Different from elder people, they tend to have a new energy car because of their environmental protection concept. As a result, electronic vehicle has been popular in the Chinese market. Unlike the depression of sales volume in China in recent years, McCarthy (2018) pointed out that ‘electric car sales are surging In China’ and nearly 579 thousand electronic cars are purchased by Chinese customers in 2017.#p#分页标题#e#
Besides that, Tesla may also gain opportunity because of the popularization of charging positions. In the previous time, the number of charging positions cannot meet the demands of new energy vehicles. It is a big problem for Chinese drivers who have electronic cars to charge for them. However, this problem may be improved in the future. Liu (2018) stated that Chinese governments has made effort to increase charging stations recently. Having heard some recent news from a nationwide charging network, Chinese government decides to increase 12,000 charging stations in order to allow nearly five million electronic cars to be charged by 2020. Additionally, China will also establish 4.8 million power stations and 500,000 will be open to the public. This may be the good news for Tesla. Thanks to the policy of popularization of charging stations in China, electronic vehicles may not only be charged at home, but also be charged outside at any time. Those who used to worry about charging problem may be satisfied with the policy and their degree of worry may be decreased. Under the help of charging positions, the gap between electronic cars and gasoline vehicles may be narrowed. As a result, it may be possible for an increasing number of drives to purchase new energy vehicles.
Through the above case studies, we can sum up the main problems faced by Tesla. Tesla's profit is declining and competitors are seizing the market. This does not mean that Tesla's products have problems. The reason is the problem of marketing strategy. Emphasizing customer value and implementing value-oriented strategy is the way Tesla should take. At the same time, Tesla's lack of accurate brand positioning and marketing mix strategy, the drastic price reduction measures contradict Tesla's strategy of positioning high-end market. In addition, the decline in sales also shows that the promotion is not enough, it is very important to expand sales channels and increase the intensity of promotion.
Price strategyAs China's auto market becomes more mature, consumers are getting more and more rational in choosing, combined with the convenience of information exchange, the price of luxury cars is becoming increasingly transparent. It is no longer appropriate for automobile manufacturers to earn the trust price difference of loyal customers by setting exorbitant prices, then offering substantial discounts to attract potential customers. Automobile consumption has changed from luxury consumption to finished product quality consumption. Honest and reasonable price is the performance of respecting the market rules of consumers. Therefore, Tesla needs to return to the original pricing strategy, that is, the US market price plus freight and various taxes and fees.
Tesla's marketing channel is experiential store sales model, but the effect of this model in China is not good. Therefore, Tesla still needs to take the following measures to improve.
Firstly, Tesla can cooperate with local e-commerce platforms in China to expand sales channels. Despite Tesla's online sales function on China's official website, it is necessary to build additional sales windows for online sales platforms with huge user groups such as Tianmao and Jingdong, considering the consumption habits of Chinese consumers and the convenience of payment. People who search for Tesla cars or similar products on the e-commerce platform tend to have a clear purchasing purpose, and their willingness to consume is stronger than those who browse on the general search engine, so Tesla can more easily target customers.
In addition, consumers often want to have a more comprehensive understanding of Tesla's actual use experience, including not only driving control but also routine maintenance and charging. So Tesla can try to offer a paid short-term lease to potential customers, giving them ample time to understand the superior experience of Tesla cars, dispel their doubts and anxiety about new energy vehicles in all aspects, and at the same time, it can play a very good role in promoting and displaying their family and colleagues when these target customers drive home or work.
Armstrong et al. (2015) indicated that satisfying consumer psychology is the key to successful marketing strategies. Tesla can encourage consumers to buy Tesla's products by incorporating the discount of used cars into the sales promotion strategy of new vehicles. If the replaced old car is also Tesla product, it can be renovated by the government and provide warranty and then sold at a more preferential price for the second time to achieve another level of preferential promotion. Meanwhile, Tesla can use reality shows and other forms to prove that Tesla can achieve long-distance travel, which can increase attention, and also can dispel potential customers’ concerns about the endurance of new energy vehicles. Additionally, the company could consider setting up some environmental protection funds in the name of Tesla to study the technology of air pollution control. It could also organize some public welfare activities with environmental protection as the theme and sponsor some documentaries with environmental protection as the title, so that Tesla's brand can be equated with green environmental protection and establish a brand image that actively participates in environmental protection in the market.#p#分页标题#e#
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