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  • Tesla imported only 532 cars into China in May.
  • Tesla buyers in Beijing still go through lottery for license plates.
  • Tesla will be a niche player in Australia.

China Market Situation

There is a lot of hope surrounding Tesla's (NASDAQ:TSLA) China deliveries. Mr. Musk himself spreads this hope everywhere he goes to hand deliver the first few cars to a few celebrity customers. When in China, he said China will be the biggest market for Tesla, cleverly avoiding any specific timeline for such prediction to come true. In UK, he said UK will be among the top 3 to 5 markets and Tesla will open R&D center there. Everywhere he goes; there is a giant ball of hope thrown at the gullible public.

In the meantime, some Tesla longs are grabbing at every floating straw to justify its high stock price. In this thread in post #264 in Tesla forum, someone cites a customer quote in Shanghai store, who said "20-30 deliveries per day." The long then quickly estimated 30/day x 30 days = 900 deliveries per month. Note how (s)he doesn't take the average but the maximum estimate (s)he could take from this piece of data!

However, early data emerging from various sources aren't looking that good. In this article, the author visited the Beijing store on June 14th, to discover that there is a lull in activity, most of the workstations are never used and the store is empty. There were only 7 Model S parked without any license plates. One would expect to see at least a few hundred cars for any substantial volume of delivery, since the cars would need to be checked for transport damage and prepared for delivery. It is worth mentioning, that Tesla buyers in Shanghai don't go through lottery for license plates, but in Beijing they do. So, the Shanghai deliveries might be somewhat higher than Beijing deliveries. Still, if the Beijing store activity is any indication, the situation isn't looking good for China deliveries.

Here is one more clue of low Model S demand in China. This article says that Tesla is planning a service center in Tromsö in Norway with a population of 71,000, but not in Chongqing, a city in China that is home to six times the population of all of Norway. Most reasonable explanation of this is that Tesla can't justify a service center there for a handful of customers. Each service center costs the company nearly $1 million to build. Then, there are operational costs associated with maintaining these centers.

Yet another sign of weakness in China market is Tesla's unceremonious beginning of offering the 60KWH Model S in China sometime last month for $104 K. This clearly indicates a lack of demand in China for the $121K 85 KWH model that was the only offering for the past 6 months.

Another issue in China and other Asian markets is that the rich owners like to be chauffeured, and Model S' back seat is not particularly luxurious. Most of these owners will take issue with their driver fiddling with the 17" computer monitor while they ride in the cramped backseat with no cup holder and no rear-seat console. Not surprisingly, Tesla has started working on a long wheelbase version of Model S. But that will likely take time to be manufactured.

Since Tesla won't say anything clearly about delivery numbers or backlogs, not even during quarterly calls, we have to do all kinds of research to gauge the demand. Investors were correlating with VIN numbers earlier, so Tesla has obfuscated that by producing cars in random VIN orders. Tesla sales figures have morphed into a giant black box for investors.

In this report, the author claims only 532 Model S imports in China for the month of May. This number is further validated by the Tesla Motors forum post #296; the posted links claim 53 imports in April and 532 in May. Most of these will probably be delivered in June or later. According to Tesla employees in their Beijing delivery center, real delivery activity started only in June. So, we can expect that it will deliver anywhere from 600 to 1000 cars in China in whole of Q2 2014. This likely covers the entire pent-up demand for this car in the country of 1.4 billion people, the second largest economy of the world.

Right Hand Drive (RHD) and Other Markets for Tesla

Tesla recently started making cars for countries with left hand traffic. The countries in blue in the map below (Source: Wikipedia) shows where people must drive on the left side of the road. Major markets with such driving rules are UK, Japan, Hong Kong, Australia, India, South Africa and some other countries. These are called 'right hand drive' because the steering wheel and driver's seat are on the right, but people actually drive on the left side of the road.

Right Hand Drive (left side driving) countries are shown in blue.

In its 10-Q filing, Tesla stated:

"In addition to increased deliveries into China, our expansion into the right hand drive markets, such as the United Kingdom, Hong Kong, Japan and Australia will occur starting this summer. We have not delivered Model S vehicles outside of North America and Europe in volume; thus, we may face difficulties meeting our delivery plans in Asia and right hand drive markets later this year..."

Tesla started deliveries in UK on June 7. It delivered 5 cars to first few celebrity customers. No mention about how many cars were delivered in total in UK. While the electric cars enjoy an incentive of £5000 in UK, the same incentive is also awarded to plug-in hybrid cars. And plug-in hybrids appear more optimal when balancing range, cost, convenience and weight. Mitsubishi Outlander, a plug-in hybrid SUV, is a formidable competitor for Tesla Model S. It has already won the Dutch market from Tesla, and is already available in UK and Ireland. There are other competitors as well. Then, there is the lack of parking garages in urban areas which limits addressable market size for Model S. Also interesting is that Tesla is yet to reprogram its assembly line for RHD cars. Given these challenges and facts, we can't expect more than a few hundred Model S deliveries in UK for this year.

Australia is another RHD market Tesla is planning to expand into. According to the company, there won't be any super charger or service center in Australia until spring of 2015. Moreover, the company has only applied for approval in the niche vehicles category, which means less than 600 cars per year. The article here has more details on this, and states:

"ANCAP has a Niche Vehicles Test Policy that means that vehicles expected to sell less than 600 cars a year can rely on international trials and Tesla's own testing."

In a recent thread on Tesla Motors forum, Australian reservation holders were able to enumerate the orders in an excel sheet! There appears to be 200 Australian orders till June 10, 2014. So, it is safe to assume that Australian sales won't make a big difference in the sales numbers in the near future.

The other RHD markets include Japan, Hong Kong, South Africa, India and some smaller developing countries in Asia and Africa. Japan has its own array of electric car makers that have saturated this market. The top sellers in Japan are Nissan Leaf and Mitsubishi Outlander PHEV with average sales of 300-400 cars per month. So, a good estimate for Model S sales will be 200 per month. Hong Kong has a potential for a few tens of sales per month. Indian and other south Asian markets can be ignored at the moment due to miniscule incentives and minimal awareness of this car.

Besides the RHD markets, there are some remaining pockets such as South America, Africa and the Gulf nations. Among these, only the Gulf region countries can afford an expensive car like Model S in significant volumes. But these regions have very cheap oil. The high temperatures in these regions is also a big issue for Lithium batteries. It is extremely unlikely, that we will see any substantial sales volume in these remaining countries in the near future. So, it seems Tesla has almost run out of nooks and corners in the world where it can expand its market profitably.

One big hurdle for Tesla in selling a few cars in far flung areas of the world is the pre-requisite to have a service center before selling any car. This is a good policy, considering how many defects and support issues their 'beta quality' car is currently having. Tesla's internet sales model doesn't quite work for cars, as there are ongoing support and repair issues with a physical good like an automobile. Shipping back the 2000 lbs. battery pack to California factory for rebuilding itself can be a substantial cost. So, a service center is really necessary to serve even very tiny markets. But at the same time, it restricts rapid expansion as this requires significant capital expenditures for such expansions.

Estimated 2014 sales by region

In this table below, we take the average monthly sales volume in Q1 2014 for Europe and U.S., and make our best guesses for China and other markets. The sales numbers are taken from this site. We take the average over a full quarter, as Model S deliveries seem to have peaks and troughs during each quarter. Australian sales are estimated based on the niche vehicle status for Tesla. Even with somewhat optimistic estimates, there seems to be a shortfall of nearly 4000 deliveries from this year's target of 35000 deliveries.


Average monthly volume (est.)

Estimated 2014 totals








150 (same as Leaf sales)

900 (July to Dec)

Rest of Europe





2,100 (June to Dec)

Japan, Hong Kong


900 (assume Q4 start in Japan)






300 (Q3-Q4)

Rest of the world


0 (not started)




So, it appears Tesla's sales growth is slowing, notwithstanding Tesla's expansion to every nook and cranny of the world. The fire in Tesla stock is also dying, despite the hope and hype blown into it by Mr. Musk and upbeat analyst Mr. Adam Jonas of Morgan Stanley (NYSE:MS). This doesn't mean all is lost. Tesla still has few tricks up its sleeves, like lowering prices or revealing cheaper Model S with smaller battery packs. What is lost, however, is the infinite demand hypothesis for its Model S sedans.

Source: Tesla's China Deliveries In Q2 2014 And Its Right Hand Drive Markets