Tesla has achieved a significant breakthrough in China by gaining access to government procurement for the first time following a price reduction in April. Jiangsu province has approved the Model Y from Tesla for use as an official vehicle for party, government and authority representatives.
New market through state registration
This approval marks the first time that Tesla-vehicles are being considered for government purchases in China. This decision opens up Tesla a new and potentially large customer base in one of China's strongest economic regions. Jiangsu, located north of Shanghai, is an important location for education and manufacturing and has one of the highest gross domestic products in the country.
Requirements for approval
The local procurement center in Jiangsu has the Tesla-models on the basis of several criteria, including passenger capacity, range, charging time and price. The price could not exceed 250,000 yuan (approx. 31,800 euros). Tesla's Model Y met these requirements, as it is now available for 249,900 yuan following a price reduction in April. This price reduction of 14,000 yuan (approx. 1,800 euros) was a reaction to the declining demand and the intense competition with Chinese car manufacturers.
Another criterion for approval was that the vehicles may not be imported. Tesla was also able to fulfill this requirement, as the Model Y is manufactured in the domestic production facility in Shanghai. According to reports, the plant in Shanghai consists of over 95 percent locally produced parts.
Importance of the approval
The inclusion of the Model Y in the list of registered vehicles is a significant success for Tesla and could pave the way for further registrations in other provinces in China. Although inclusion on the list does not guarantee that many vehicles will be purchased in the future, it is nevertheless an important recognition and provides Tesla the opportunity to open up a new and stable market.
Challenges and future prospects
The approval comes at a critical time for Tesla, as the company faces a global decline in demand for electric vehicles and increasing competition, particularly from Chinese manufacturers such as BYD. Despite a recent improvement in delivery figures compared to analysts' expectations, the company reported Tesla reported a decline in sales figures for the second quarter in a row.
Access to the Chinese government market could Tesla help to counter these challenges. Elon Musk also visited China in April and held talks with high-ranking government representatives to strengthen relations and discuss future technologies.
The approval of the Model Y in Jiangsu could be a decisive step towards increasing the presence of Tesla in the important Chinese market and achieve long-term success.
