Tesla summoned by Chinese regulators for quality concerns

Tesla, which is seeing rapid growth in China as it ramps up local manufacturing capacity, has been called upon by the Chinese government for talks over quality issues in its electric cars.

A group of Chinese authorities, including the country’s top market regulator, cyberspace watchdog and transportation authority, held talks with Tesla after consumers complained about acceleration irregularities, battery fires, software upgrade failures and other vehicle problems, according to a government notice posted late Monday.

Tesla said on microblogging platform Weibo that it “sincerely accepts the government departments’ guidance” and will “strictly comply with Chinese laws.” It will also work to strengthen its “internal operational structure and workflow” under the direction of the regulators in order to ensure safety and consumer rights.

While its popularity surged in China over the past few years, Tesla has made a series of recalls due to faulty parts or functions in the country. Just before its meeting with the government, the American EV giant recalled 20,428 imported Model S vehicles and 15,698 units of imported Model X, China’s market regulator announced last week.

China is an increasingly important (and the second-largest) market for Tesla. The Gigafactory in Shanghai, where Tesla enjoys tax breaks granted by the local municipal government, has allowed the carmaker to localize procurement and production, thus driving down prices in products like Model 3.

China contributed $6.66 billion in revenue for Tesla in 2020, more than doubling the amount from a year before, and accounted for more than 20% of the firm’s total revenues, according to Tesla’s filing with the Securities and Exchange Commission this week. In 2019, China made up just around 12% of Tesla’s revenues.

Tesla is competing with a handful of well-financed and indigenous electric car startups in China, such as Nio and Xpeng, which are both listed in the U.S. For comparison, Xpeng shipped a total of 27,041 vehicles in 2020, while Nio topped that with 43,728 units shipped. These numbers are still fractions of Tesla’s total delivery, which reached 499,647 vehicles in the year.

China now accounts for nearly one-quarter of Tesla revenue