With racing and music events, Tesla gets over marketing allergy in China

Tesla Inc (TSLA.O) has always shown disdain for marketing, with CEO Elon Musk boasting his company does not advertise, instead using the money it would have spent to develop products.

But in China, the world’s biggest electric vehicle market where Tesla is gearing up for a major sales push, that tune has started to change as the automaker promotes racing events, showroom parties with DJs and a line of Chinese Tesla stickers for chat apps.

Case in point: Wang Yubo, a 30-year-old marketing executive and Tesla car owner, was invited by the company to burnish his driving skills at a Shanghai racing track this month.

“I learned how to push my Model 3 to its limits,” said Wang, who writes both enthusiastic and critical blogs about Tesla and occasionally races his car with friends.

Tesla is expanding its focus beyond products to service, says Leo Liu, head of the company’s China driving school which aims to teach people “to make full use of their cars”.

It held three such events for auto reporters, social media influencers and a handful of owners in August – one in Beijing and two in Shanghai and plans to expand to other big cities such as Guangzhou and Chengdu.

“We are also thinking of having more difficult ones on ice tracks in winter this year,” Liu said, adding that more owners will be invited in the future.

While Tesla hasn’t embarked on conventional TV or billboard advertising, the U.S. firm’s China Chief Tom Zhu has been working on strategies this year to boost the brand’s appeal, frequently seeking ideas and opinions from marketing and sales experts, sources familiar with the discussions said.

The sources were not authorized to speak to the media and declined to be identified. Tesla declined to comment.

BIG FACTORY, BIG PLANS

Helping raise his profile in China, Musk is currently visiting the country and on Thursday held a discussion with Alibaba’s (BABA.N) Jack Ma at an AI industry event, although they avoided controversial issues like the U.S.-China trade war.

Tesla’s new efforts to reach customers in China come as the Silicon Valley automaker is preparing to open a big vehicle assembly factory in Shanghai and confront fierce competition in the luxury electric vehicle market it invented.

The firm’s first overseas factory is due to start production by the end of the year and Tesla has said it should be able to build 3,000 Model 3 vehicles a week in its initial phases.

That would translate to nearly four times the number of imported Model 3 vehicles sold in China per month this year, according to figures from research firm LMC Automotive.

The plant is slated to have annual output capacity of 250,000 vehicles after production of the Model Y is added.

“We have to learn how to manage a larger sales and after-sales system as production is growing to a completely different level,” said one source. “That’s why we are doing these events now.”

The sources added, however, that Tesla is spending far less than what a conventional carmaker in China would be spending on marketing.

In Tesla’s favor, it has been exporting cars to China since 2014 and remains the benchmark that other automakers in China often compare their electric vehicles to when they advertise.

The launch of the Model 3 for the Chinese market in late February has also gone well, sending Tesla’s China revenue jumping 42% to $1.5 billion in the first half – equivalent to 13.5% of total revenue.

But Tesla in China doesn’t have the headstart in all-electric vehicles that it had in the U.S. market when it debuted the Model S in 2012.

Chinese startup Nio Inc (NIO.N) sells two premium all-electric SUVs, Jaguar has launched is I-PACE SUV and BMW (BMWG.DE) has its i3 hatchback and i8 sportscar. By the end of the year, Audi will have two all-electric SUVs on the market while Daimler’s (DAIGn.DE) Mercedes will have one.

The U.S firm also doesn’t expect Musk’s cult status to propel sales to the same extent it does elsewhere, the sources said.

Most Chinese do not have easy access to his Twitter feed followed by nearly 28 million, although Tesla translates some of his less controversial tweets on its Weibo account.

In addition to chat app stickers that express various emotions – a market strategy also used by other automakers – Tesla is partnering with Tencent’s (0700.HK) QQ Music streaming service in organizing parties with DJs at showrooms.

Both marketing tactics are China-only developments, the sources said.

Social media users have noticed much more activity on Tesla’s Weibo account in recent months while company has also held several roundtables with reporters and internet influencers throughout China since July.

According to sources, executives explained pricing strategy and expansion plans for its charging network and said they wanted to improve communication with the public.

By contrast, in the United States Tesla rarely grants media access to its executives beyond earnings calls and product launches.

“Tesla has finally realized the importance of adjusting to China,” said Wang. “Given time, it will become more mature.”

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