Tesla’s Model 3 could capture the imagination and the wallets of Chinese consumers, the same way iPhone 4 did a decade ago.
That’s according to a piece published recently in Globaltimes. “As US-based electric carmaker Tesla gears up its deliveries of the Model 3 in China, test drives are in hot demand at Tesla showrooms,” says Hu Weijia, author of the piece. “Some customers have shown great enthusiasm for the Model 3, just like they did almost one decade ago when the iPhone 4 made its debut in China.”
Back in October 2010, iPhone 4 sold out in 10 hours after its on-line launch in China.
There a couple of good reasons for drawing parallels between Model 3 and iPhone 4. One of them is that both products are “cool.” And that makes them status symbols for China’s rising middle class.
Then there are Tesla’s plans to manufacture Model 3 in China. As was the case with iPhone 4, local manufacturing will give Model 3 several advantages — localization, avoiding of import tariffs, and other customs costs.
In the case of Tesla, there’s the added enthusiasm for electric cars, which are seen as a solution to the country’s enormous pollution problem. In 2018, sales of new-energy vehicles rose 83% year-over-year, according Weijia.
And there’s the price of Model 3. At roughly $72,000 starting price, it’s an affordable luxury for a broad mass of the Chinese middle class consumers.
Marketers would agree. A lower price will eventually help Tesla cross the “tipping point” in China.
That’s the sales threshold at which its products will reach a critical mass of consumers, as outlined in the marketing literature by the Rogers Curve.
Everett Rogers argues that the diffusion of new products is a multi-stage process. It begins with awareness, interest, evaluation, trial, and adoption. In the early days of a product launch, consumer awareness is slow, as “innovators,” a small consumer group, adopt the product. Then, the rate of diffusion accelerates, as “early adopters,” another small group of consumers in contact with innovators, adopts the product too.
Both groups aren’t price sensitive. They are buying the product out of excitement and curiosity.
Eventually, diffusion may reach the “tipping point,” during which two larger groups of consumers became aware of the product, the “early” and the “late majority.” They fuel a cascade (exponential sales growth), and the commercial success of the new product.
Both groups are buying the product because they see value in it, compared to alternative products. That’s why they are price sensitive.
Simply put, price is a key factor for a new product to reach the masses in every market, and the Chinese market isn’t the exception to this marketing rule.
Still, Tesla’s China comes at a time when Consumer Reports dropped its recommendation for Model 3.
“Consumer Reports can no longer recommend the newest Tesla—the Model 3 electric sedan—because members say they’ve identified a number of problems with their cars, including issues with its body hardware, as well as paint and trim. CR members reported these results in our annual reliability survey, which includes data on about 470,000 vehicles,” says the report.
The Consumer Reports news has tempered Wall Street’s enthusiasm for Tesla shares. And it may temper the enthusiasm of Chinese consumers for Model 3.