By Trefor Moss and Yoko Kubota
SHANGHAI -- Tesla Inc. has been summoned by Chinese authorities
citing consumer complaints about quality issues, a warning for the
electric-vehicle maker in a country where it has enjoyed a welcome
rarely seen for foreign companies.
The State Administration for Market Regulation, China's top
market regulator, said Monday that it and four other regulators had
instructed Tesla to abide by Chinese laws and regulations and
strengthen internal management to ensure the quality and safety of
its products.
It was a rare rebuke for Tesla, the first foreign auto maker to
operate a wholly-owned plant in China.
In a statement late Monday in China, Tesla Shanghai said it
"sincerely accepted the guidance of government departments." It
said it had "deeply reflected on shortcomings" and was working on
strengthening its operations. It also said it would investigate
Chinese consumers' complaints and abide by Chinese laws and
regulations.
China's highly public message of dissatisfaction with Tesla's
quality issues comes as the Palo Alto, Calif., electric-car maker
ramps up production of the Model Y compact crossover vehicle at its
plant in Shanghai. It also follows recent global recalls of the
U.S.-made Model X sport-utility vehicle and Model S sedan, which
affected imported models in China.
Vehicle recalls are common in the auto industry. However, Tesla
has often performed poorly in quality surveys conducted by
market-research company JD Power. In one such survey last year, it
came last out of 32 vehicle brands in terms of quality.
While vehicles built in Shanghai weren't affected by the latest
recalls, the summons by regulators was seen as a warning to Tesla
to get its act together as it expands local output, said Tu Le,
managing director of Sino Auto Insights.
"It seems that the ministries are trying to get out in front of
potential failures as Tesla ramps up Model Y production," he
said.
For Tesla, the regulatory summons marks a change in tone from
its Chinese hosts.
Tesla won approval for its Shanghai factory in 2018 despite the
deterioration of U.S.-China trade relations under former President
Donald Trump. In doing so, Tesla became the first foreign auto
maker to operate a wholly-owned plant in China, taking advantage of
a recent rule change allowing foreign EV makers to manufacture
without a local partner from 2018 onward.
That success has made Tesla the envy of the auto industry in
China, where other global auto makers must devote significant
energy to managing the relationship with their local joint-venture
partners. It also signaled that even in the heat of the U.S.-China
trade war, U.S. companies could flourish in China by making
long-term commitments to the country.
Some of China's biggest state-owned banks were instrumental in
funding Tesla's operations in the country, while local authorities
issued permits with unusual speed, allowing Tesla to start making
the Model 3 sedan at its Shanghai plant only a year after the
January 2019 groundbreaking. It recently started assembling the
Model Y there, too.
As Tesla's production in China expanded, technical and quality
issues around its cars started to come under the spotlight.
Last month, the state-run Economic Information Daily reported on
accidents of locally produced Model 3s, as well as of the imported
Model S, saying they were caused by a malfunction in Tesla's
autopilot system.
Tesla also suffered a recent run-in with Chinese utility State
Grid Corp. after a Tesla employee appeared to suggest to a customer
in a recording that the state-run company was to blame for battery
issues in a Model 3 vehicle.
Coming on the heels of broad regulatory action against a number
of private-sector companies in China, the public announcement that
Tesla had been called in to regulators showed Beijing's concern
with the company's operations in China and the urgency in
addressing the issues.
"This is a warning to Tesla but can also be read as a warning to
all the EV companies," said Mr. Le of Sino Auto Insights. He
pointed to various car makers who have rushed to build and sell
more electric cars -- packed with batteries and software -- in the
world's biggest EV market.
Tesla's recall announcement last week affecting the Model S and
Model X followed the recall of 48,442 imported Model S and X cars
in China in October over concerns about faulty suspension
systems.
The Global Times, a state-owned Chinese tabloid, criticized
Tesla this weekend after the latest recall announcement, saying the
car maker "is far from understanding Chinese consumers."
Quality issues don't appear to have slowed Tesla's sales
momentum in China, however. The company sold 15,484 locally built
Model 3 sedans and Model Y compact crossover vehicles in January,
according to the China Passenger Car Association.
That followed China sales of 135,400 vehicles last year,
according to the association, a performance that helped the company
post its first yearly profit of $721 million in 2020.
Raffaele Huang contributed to this article.
Write to Trefor Moss at Trefor.Moss@wsj.com and Yoko Kubota at
yoko.kubota@wsj.com
(END) Dow Jones Newswires
February 08, 2021 12:39 ET (17:39 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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