Tesla Motors Inc chief executive Elon Musk is prepared to fire overseas executives, people with knowledge of the matter said, after weak Chinese sales of the company’s luxury electric cars cast doubt on his ambitious global expansion plans.
Tesla sold about 120 cars in China last month, one of the sources said, well below the company’s aggressive targets. Musk has previously said he expected Chinese sales could rival those in the US as early as this year.
Two top China managers left the company last year. Musk indicated other country managers who are not meeting targets might lose their jobs, the sources said.
The sources, who spoke over the past two weeks, were not willing to be identified because of the sensitivity of the matter.
Tesla shares slumped 7 percent on Jan. 13 after Musk said Chinese sales were “unexpectedly weak” during the fourth quarter.
“We’ll fix the China issue and be in pretty good shape probably in the middle of the year,” Musk said at the time.
He was more blunt in an internal e-mail to managers late last month, threatening to fire or demote country managers if they are “not on a clear path to positive long-term cash flow,” according to two people who have seen the e-mail.
Reuters did not view the original e-mail, but was provided with a written transcript of several key passages by one of the sources. A second source confirmed the authenticity of the e-mail.
While Tesla sales in many overseas markets from Europe to Asia have not met expectations — and executives have subsequently been fired or demoted — results have fallen far short in China, a key market for Musk’s expansion strategy.
Musk has said Tesla plans to boost annual production from a projected 50,000 cars this year to 500,000 by 2020, with the US and China as the company’s two largest markets. Last month, Musk made an even more bullish projection that production would reach “a few million” cars a year by 2025.
However, Chinese sales have persistently lagged expectations, triggering an executive shuffle. The company in mid-December last year confirmed the departure of China head Veronica Wu (吳碧瑄). General manager Kingston Chang left Tesla in March last year.
Musk said in the internal e-mail that underperforming company managers in overseas markets “will be asked to leave or assume a more junior role. This has already happened in China and will likely happen in some other countries, too.”
Tesla began taking orders in China in mid-2013 for its sole product, the Model S sedan, and in January last year said the Chinese version of the car would be priced from approximately US$121,000, including duties and shipping costs. In an interview at the time with Bloomberg, Musk said Tesla sales in China might equal those in the US as early as this year.
However, since then, Tesla has encountered several speed bumps in China, including the departures of the two executives and the slower-than-expected ramp-up of its retail network. A year ago, Wu said China was expected to contribute “30 to 35 percent” of Tesla’s global sales growth last year.
“China has been a big disappointment and that’s bound to impact company goals,” a person close to the company said. “So they need to show that they are taking some action to cut costs.”
Tesla’s Model S is one of the most popular electric cars in the US, despite a starting price of more than US$70,000. Last year, Tesla sold an estimated 18,700 cars in the US, according to Autodata.
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