Tesla Might Be World’s Most Valuable Automaker But Japan Didn’t Get Memo

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Earlier this month, Tesla surpassed Toyota in market capitalization making the electric car company the world’s most financially valuable auto company. Clearing a market cap of $206 billion, this result means Tesla has greater value than GM, Ford and Fiat Chrysler combined. 

Last year, the EV firm sold 367,500 units globally, spurred on by the market penetration of its reasonably-priced Model 3. As of March 2020, the Model 3 is the world’s best-selling EV in history, with over 500,000 units delivered. It was also the top selling plug-in car in Europe in 2019. From July 2019 to June 2020, Tesla recorded four profitable quarters inT a row for the first time, making it eligible for including in the S&P 500.

However, it would seem as though Japan did not get the memo. In the world’s third largest auto market, Tesla barely registers a blip. In mid-2010, the first Roadster sports cars were shipped to Japan and in 2014, Tesla CEO Elon Musk himself handed over the first Model S sedans at a high profile ceremony on the 52nd floor of a ritzy Tokyo skyscraper.

Musk’s expectations for Japan were high back then as he predicted Japan would become Tesla’s No 2 sales stream. Those high sales never eventuated. While sales figures are hard to extrapolate as Tesla withholds its Japanese sales numbers, one source with knowledge of import figures says that of the 1,378 imported pure electric vehicles sold last year, around 90% were Tesla models. In contrast, Japan’s biggest selling EV, the Nissan Leaf, sold an average of 1,650 units per month throughout 2019.

Having test driven the Model S, X and 3 over the past several years, and interviewed over a dozen owners and potential buyers, I have learned that Japanese customers find Tesla to boast stylish design and industry-leading range, but many potential clients worry about Tesla’s ability to service vehicles in Japan given its tiny dealer network.

Another reason hampering Tesla’s reach in Japan is limited brand recognition. A Nikkei Research poll from March 2019 revealed that of 1,000 adults interviewed, only half knew of Tesla, where as the Nissan Leaf registered 98% recognition. Japanese buyers also expect a high level of white-glove customer care and unfortunately Tesla’s direct-to-customer business model doesn’t translate well in such a hospitality-centric market.

Could Tesla’s woes in Japan have anything to do with tariffs or import taxes? Not likely. For decades, the U.S. administration has complained that Japan runs a closed auto market. The truth of the matter is that Japan actually permits U.S. cars to enter tax-free, while the U.S. charges tariffs of 2.5% for cars.

So if Tesla in Japan wants to improve its sales position, it must focus on strengthening its brand identity, beef up its customer care experience and expand its dealership network, which would directly enhance potential buyer’s peace of mind in the firm’s ability to offer sufficient levels of service and maintenance.

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