China — Tesla faces mounting pressure in China as state media and regulators criticize the electric carmaker following an alleged customer’s protest at a major auto show this week.
Tesla could be facing one of its worst public relations crises in China, a market investors see as critical for its future growth.
On Monday, a woman who claimed to be a Tesla customer stood atop one of the company’s cars at the Shanghai auto show with a T-shirt that read “brakes don’t work” in Chinese. She was protesting an alleged brake failure in her car — an issue which other Chinese social media users claiming to be Tesla drivers have complained about in the last several months. A video of the incident went viral on Chinese social networks and was picked up by state media.
On Tuesday, Shanghai police identified the protester by her surname Zhang and said she was sentenced to five days detention for disturbing public order.
Tesla alleged the woman was involved in a collision in February due to “speeding violations” and that in their two months of negotiations, she would not allow a third-party inspection but insisted on a refund for the car.
Criticism for being ‘arrogant’
Tesla’s vice president for China, Tao Lin, claimed in an interview Monday with Chinese financial news publication Caijing that the woman hoped for a high level of compensation, and the company doesn’t have any reason to give it to her.
In a post on Twitter-like service Weibo, Tesla said it would not compromise with “unreasonable demands.”
Both state media and a government agencies were quick to reprimand Tesla. State-run news outlets published a string of editorials, while the Chinese government’s central disciplinary commission issued a warning statement.
One state media article titled “Three lessons Tesla ought to learn” advised the U.S.-based electric automaker not to be “arrogant” and to “respect” the Chinese consumer market. That’s according to a CNBC translation of the Chinese-language text.
“The arrogant and overbearing stance the company exhibited in front of the public is repugnant and unacceptable, which could inflict serious damage on its reputation and customer base in the Chinese market,” state-backed tabloid the Global Times said in a separate opinion piece published Wednesday.
Tesla apologized in a statement for not solving the car owner’s problems in a timely manner.
In two Weibo posts on Monday and Tuesday, Tesla said that it’s willing to cooperate with authorities. The company said it will carry out “self-examination and self-correction” to “rectify” problems with its customer service process.
On Thursday, Tesla said it handed over raw vehicle data to Zhang from 30 minutes before the crash in question took place. The company has also been in communication with two market regulators.
Tesla’s rise in China
Tesla has been a poster child for Beijing’s efforts to demonstrate that China is letting more foreign businesses into its relatively closed market.
Tesla has stepped up its focus on China in the last two years. With the support of the government, Tesla broke ground on a major Shanghai factory in 2019 and last year began delivering Model 3 vehicles made at that site to customers in China.
Tesla’s China sales more than doubled in 2020, and the Model 3 was the best-selling electric car in the country.
CEO Elon Musk even met with Premier Li Keqiang in 2019. But with success comes scrutiny, especially as China’s homegrown companies look for a larger slice of the growing electric vehicle market.
China’s favorable policies toward electric cars have spurred the creation of a number of start-ups hoping to compete with Tesla such as Nio and Xpeng Motors, although their sales are still far behind Tesla’s.
