Tesla plans to sell budget models in Korea

December 30, 2015

By Kim Yoo-chul

Tesla Motors plans to sell its latest budget electric vehicles (EVs) in Korea from next year to offset the effects of its sluggish sales in China.

“Based on our own research on the demand of EVs here, Tesla Motors plans to sell budget models from next year. Tesla wants to increase its brand awareness and on that front, Jeju Island could be the right spot for Tesla EVs given the infrastructure there,” an official said, Wednesday.

According to industry sources, the Model E will initially be sold on the resort island with a suggested retail price of about 42 million won without subsidies from the country’s environment ministry and Jeju Special Self-Governing Province.

“The budget model will be offered at about 22 million won to local consumers with subsidies, making Tesla products highly-competitive in terms of pricing compared to other models offered by Hyundai-Kia and Renault-Samsung,” the official told The Korea Times requesting anonymity.

The decision is in line with the company strategy to bolster its presence in the local market after recently opening a legal office here.

“The official launch date has yet to be fixed; however, it’s unlikely that the automaker will sell the pricier Model Ss and Model Xs anytime soon in Korea because it’s risky to introduce premium EV models given yhe less than solid infrastructure for EVs,” said a Jeju government official.

Korea is a small market for the automaker compared to other Asian powerhouses such as China, but industry watchers say the country has “huge potential” to grow rapidly powered by government initiatives to expand eco-friendly projects.

According to EV Obsession, a market research firm, 955 EVs were sold in Korea in the first half of the year, an increase of 162 percent, year-on-year.

“Jeju is the hot spot for Chinese tourists. If Tesla offers a good testing experience to Chinese visitors on the island, then this will help build up its brand awareness in China, which the company has identified as its most crucial market,” according to the official. At the end of 2014, some 2.5 million Chinese tourists had visited the island.

“Tesla is in the process of resetting its strategy for China, and the Korea expansion plan focusing on Jeju will be a good litmus test for the company,” according to the official.

Such a low-key approach means Tesla has no imminent plans to build supercharger facilities on Jeju as it can use the already established charging infrastructure. Jeju aims to make itself carbon emission free by 2020.

“With one-time charging, Tesla EVs can run entire Jeju roads. This is good bet as Tesla could hedge investment in risks, while Jeju can promote its carbon emission-free policies partnering with the carmaker,” he said.

Tesla’s business expansion could pose a threat to major local carmakers as its Model E has a better performance than the EVs they produce, said experts.

For example, the E model can run 320 kilometers with one-time charging ― while most existing local EVs run between 120 and 150 kilometers ― as Tesla models use expanded batteries.