Tesla Motors Inc (NASDAQ:TSLA) is expecting to get a grand reception in China just like it got in the United States. The electronic car maker is planning to keep the price of the Model S similar in China as that in U.S. In China Model S sedans is priced at 734,000 Yuan or around $121,280.
Tesla keeping a smaller mark-up
The price, when compared to that with the United States, is 50% higher due to “unavoidable taxes, customs duties and transportation cost,” according to Tesla. The mark-up charged by Tesla is relatively smaller than the rivals. If the shipping cost of $3,600, custom duty and taxes of $19,000 and valued added tax of $17000 is deducted from the price, it will be same as in the United States of America before subsidies.
Tesla Motors Inc (NASDAQ:TSLA) said that they are aware of the fact that there competitors would try to convince the customers in China that Tesla is priced low because of its low performance and features, but the real reason is that the cars that are priced higher make two times more profit per car in China compared to the United States or Europe.
Luxurious cars like Audi, Jaguar and Land Rover tag their cars at high prices, which have become an issue in China. Tesla tried to make the pricing case simple, and detailed that high import duty of around 25% and valued added tax of 17% in China compel the car makers to increase the price of their cars compared to the other countries.
A Bold Move
Through its price strategy, Tesla might indicate that the electronic and hybrid cars in China did not receive the kind of market they expected even after the government programs. Tesla announced a couple of weeks ago that it will set up a network of free charging stations in the country. Tesla would also like to keep the price lower to avoid the being named as one of the conspicuous luxury models that government officials are avoiding.
Tesla Motors Inc (NASDAQ:TSLA) has taken a bold step by deciding to keep the price of its cars lower than other luxurious cars. However, it is seeing an increased demand of the cars even though its advertising budget has been zero.