Jenny Chan 陳詠欣
Jan 26, 2016

Elon Musk: Hong Kong a 'beacon' city for electric vehicles

HONG KONG - While Elon Musk's appearance in Hong Kong yesterday yielded no new multi-million-dollar projects, the famous billionaire inventor and entrepreneur, appearing in his capacity as Tesla Motors CEO, lauded Hong Kong's supportive policies and announced a new Tesla store in Macau and a possible production factory in China.

Musk in Hong Kong
Musk in Hong Kong

With 27 percent growth in new electric vehicles (EVs) registered in the past two years in Hong Kong, the Tesla Model S sold 2,221 units in the market in 2015, which according to the company outsold all other sedans.

The Model S now accounts for 70 percent of all EVs on the road in the city, which led Musk to consider Hong Kong a "beacon city for electric vehicles" despite it being not a very drivable place. In fact, he said Hong Kong has the world's highest per capita population of Tesla vehicles. 

Musk himself is in the same way a beacon for the Tesla brand, an evangelist who speaks with authority on a wide range of issues. For example, regarding China, where the major source of electricity powering EVs is coal, Musk forthrightly tackles questions like "Can Tesla still say it is green?"

"It is important to ensure that both the production of energy and consumption of energy is sustainable," he said yesterday after arriving more than fashionably late to his press conference. "If either of those two things are missing, we do not have a sustainable future." In his view, the right way is to combine wind, solar, hydroelectric, and to some extent, nuclear energy in the right circumstances. "I do expect that China is going to radically move towards solar and wind power," he added.

Tesla's marketing strategy has been hyper-targeted and direct, while its distribution strategy has been quite different from that of legacy automakers, bypassing the dealer network.

In light of that, there is "a lot more support" provided from the HK government than the mainland government for EVs, which Musk was careful to point out that was "just an objective fact, not a subjective judgment". 

Hong Kong could serve as "a leading example for the rest of the world" as a high-density city handling electric vehicles and integrating charging infrastructure quite well, he said. Hong Kong currently has the most Superchargers in the world—42 in 10 locations.

"I'm super appreciative that the policies of the Hong Kong government are really excellent in pursuing this goal of encouraging the advent of electric vehicles," he said. "I currently do not foresee any city exceeding Hong Kong. We're still very far from saturation of EVs in Hong Kong. A simple acid test is how many electric cars can you see when driving in Hong Kong now, compared to gasoline cars?" 

The mainland China market has 15 stores in seven cities. "We do reasonably well in China but we do face high import duties and do not have access to local incentives," said Musk. This means effectively the cost of a Tesla car in China is "much higher than it would be anywhere in the world."

In order to address that issue in the long term, assuming that government regulations do not change, Tesla is investigating options for local production partners. "Our rough internal timing is to come to a conclusion by the middle of this year," he said. 

Tesla's biggest area of expansion "in the next year or two" will be in Asia, and a new Macau store is also slated to open later this year. 

In the meantime, Musk is doing all he can to ease EVs into the auto market by going high-price, low-volume first, then mid-price, mid-volume, and finally low-price, high-volume. "We're in the middle stage of that strategy with the Model S and Model X," he said. "The more affordable Model 3 will be mass-marketed from the middle of 2017." 

Are low oil prices going to dampen customer demand for EVs? "There will definitely be some negative effect as this will change the economics of ownership—that's the true answer," he said. "But the reason that people are buying our cars is because they think it's the best car of any kind, whether it's gasoline or electric."

"We started the company beginning of 2004 with five people when the price of oil was even lower than today," he said. "The key is to make a Tesla car such that even with low petrol prices it's compelling."

To David Holland, head of design at Geometry in Singapore, Tesla's word-of-mouth marketing that fuels its purchases is simply "incredible", and probably the main reason it's selling, at least in Asia, where it has a "higher enigma quotient than Apple."
In fact, Tesla's marketing "does not feel like marketing", commented Saurabh Sharma, head of planning at Ogilvy & Mather Beijing. "Check out their Instagram feed. It's all user stories. Interesting, reassuring and informative."
"We get more press than we deserve, and from the press coverage you would think Tesla is a very big company," said Musk. "Actually there are 90 million new cars and trucks made every year and only 0.2 percent of them are pure EVs. We're not even past a decimal point. We're still at the beginning of transitioning to sustainable transport and there's a long way to go."



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