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Tesla’s Gigafactory in Shanghai, China. The electric car pioneer is being forced to rethink its strategy in the world’s biggest auto market.

Tesla’s Gigafactory in Shanghai, China. The electric car pioneer is being forced to rethink its strategy in the world’s biggest auto market.

Photo Illustration: 731; Photo: Qilai Shen/Bloomberg

Tesla’s Fall From Grace in China Shows Perils of Betting on Beijing

Elon Musk won advantages unheard of for Western businesses. Then came the reality check.

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Huang Jiaxue, a businessman in Wenzhou in eastern China, was thrilled when he got his Tesla Model 3 late last year. The car was good-looking, environmentally friendly, and even domestically built, having rolled off the line at California-based Tesla Inc.’s vast factory in Shanghai. But in May he sold it, recouping only about 75% of the 249,900 yuan ($38,600) he paid. “It’s out of safety concerns,” Huang said, citing reports on Chinese social media, vigorously disputed by Tesla, about the brakes failing in its vehicles. “Reading about it every day, I’ve been afraid of driving.”

There’s little-to-no concrete evidence there’s anything wrong with the brakes in Tesla’s China-built cars. What is clear, however, is that the remarkable honeymoon Elon Musk enjoyed in the world’s most populous nation is over. After receiving red-carpet treatment from government officials, who granted Tesla the unprecedented concession of allowing it to wholly control its local subsidiary, the carmaker is now being forced to rethink its strategy, from customer service to public relations, in a market that’s key to Musk’s long-term ambitions.