The interesting reason a Tesla Model S costs only 50% more in China

Tesla has announced the pricing of its Model S for affluent Chinese EV car enthusiasts. How Tesla arrived at its price point and why US Tesla’s customers may care.

Publicly traded Tesla has just announced that it will be selling the Model S in China for less money than it could get, because it cares about the Chinese consumer and wants to do the right thing, rather than maximize profits. Tesla has a long waiting list of US customers for Model S electric super-sedans. Depending upon which interview you watch, Elon Musk will say it is someplace in the area of three months for the base model and "Priority Delivery" for the fancy $120,000 version is a little bit quicker because money can buy you a faster delivery.

So stepping back for a moment, here we have a publically traded, US-based manufacturer, which used a US government loan to start operations, with a huge backlog of American buyers, who just announced “This pricing structure is something of a risk for Tesla, but we want to do the right thing for Chinese consumers. 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 US.” The general buzz so far is that Tesla owners and fans (not so sure about institutional stock investors and the SEC) think this is a great idea. Tesla clearly knows its base.

The risk that Tesla refers to is that Chinese buyers might think the Tesla is a lesser car since its competitors cost so much more. They then might not buy the car.

The cost of a mid-range Model S in China, according to Tesla, is now $120,670. The average Chinese family earns $2,100 per year according to the New York Times. Actually, the Tesla itself is only about 2/3rds of the $120,670. The other third according to Tesla is a $17,700 value added tax, $19,000 more in customs duties and more taxes, and Tesla charges $3,600 in shipping and handling (which seems more than fair).

Just an interesting comparison to show the huge range of costs to own an EV on Earth, according to California’s green car buying guide a new 2013 Nissan Leaf will cost a California resident $11,300 after tax rebates. That is the out of pocket purchase price after government incentives, not a lease deal or some kind of temporary use program. $11,300 and you own an EV. The 2014 Leaf is expected to cost less.

Photo courtesy of the Tesla public page, video credits shown in the video.