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Tesla Sticker Shock in China Doesn't Tell the Full Story

Tesla Motors China
A Model S sedan in the Tesla showroom at Parkview Green Shopping Mall on Nov. 3, 2013 in Beijing. Photographer: ChinaFotoPress via Getty Images

A Tesla in China will set you back at least $100,000. That makes it the most expensive country to buy a Model S, according to Bloomberg Rankings.

But Tesla Motors’ high prices in China, compared with 16 other countries where the electric-powered sedan are sold, aren’t unusual in the world’s biggest auto market. Wealthy Chinese are used to experiencing sticker shock when shopping for foreign luxury vehicles.

China’s import and sales taxes account for a large part of the markup on high-end cars. They make up about 30 percent of the total price tag on a Model S, according to figures published by Tesla. The Model S in China costs about 63 percent more than in the U.S., according to data compiled by Bloomberg. Tesla said in a statement that it could charge the Chinese twice as much as Americans if it followed industry standards but that doing so would be unfair to customers there.

Going after China’s ultra-high-end consumer has worked for BMW. The world’s top-seller of premium cars introduced limited-edition models for the Chinese market in January that go for 2.77 million yuan ($458,000). Car ownership in China is generally pretty expensive anyway. When you’re paying more than $14,000 for a license plate in some cities, it limits the potential market for drivers — and that’s no accident. A half-dozen Chinese cities, choked by smog, have imposed quotas on new plates. Their concerns over air quality create a marketing opportunity for Tesla and other electric-car companies.

Environmental issues aside, Tesla’s strategy to stay on the low end of the luxury-car scale seems well-timed. While car sales in China were up 13 percent in April, demand for pricier vehicles made outside of the country and other expensive items has slowed as President Xi Jinping continues to crack down on lavish spending by officials. Last year, luxury spending in the nation rose at the slowest pace since at least 2000, according to Bain & Co.

Not every luxury good is drastically more expensive in China. For example, China was 18th on the Bloomberg Rankings list of the most expensive countries to buy an iPhone. The price there was 33 percent higher than in the U.S. The difference, of course, is that like many gadgets, the iPhone is made in China.

General Motors, which makes some cars in China including the Buick brand that’s especially popular there, told the Wall Street Journal last year that imported vehicles make up a small segment of its business in the country. In April, Tesla CEO Elon Musk said the company will make cars in China in the next three to four years. That should help the automaker bring the price down dramatically.

Before Tesla gets a factory setup in China, the automaker is investing in the country in other ways. It’s installing supercharger stations in Shanghai and Beijing. CNET reported that the country’s first solar-powered supercharger opened in Beijing last week, allowing Tesla owners there to quickly fill up their batteries for free like they can in many parts of the U.S. and other cities around the world.

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