A clash between electric-vehicle maker Tesla and China ecommerce giant Pinduoduo, which started in late July, has not only failed to blow over but has escalated, with both sides reportedly hinting they would back consumers who wanted to take legal action against the other party.
The battle perfectly encapsulates tension between companies that wish to retain tight control over all aspects of their consumer experience and China's no-holds-barred consumer culture. With Tesla now facing public criticism for failing to honour sales it had nothing to do with, control over brand equity, the buying experience, pricing and consumer data are all on the line. And both brands face the risk that the spat could easily become a pawn for politicians.
The controversy stems from a promotion in which Pinduoduo said that if 10,000 potential buyers signed up, five lucky winners would get to buy a China-made Tesla Model 3, through a company called Yiauto, for a price RMB 40,000 (US$5800) lower than its official retail price—with the subsidy to be paid by Pinduoduo.
Tesla, which operates on a direct sales model to maintain tight control of both pricing and the buying experience, quickly responded that it had nothing to do with the promotion, had sold cars to neither Pinduoduo nor Yiauto, and would not deliver cars sold in this manner. And indeed, reports surfaced online of Tesla refusing to deliver to a Wuhan buyer. However, other reports said a Shanghai buyer did receive a car.
In an official post, the carmaker said it terminated the orders because Pinduoduo had placed the orders using the consumers' personal data, a violation of its policy against reselling.
"Tracking consumer purchases is a critical part of any branding and marketing strategy," Ray Rudowski, MD and founder of Epic Communications in Hong Kong, told Campaign Asia-Pacific. "Tesla in this scenario has no idea who bought the cars, what motivated their purchases, how they feel about the brand, and so on. All that is now potentially in the hands of a third-party. This is an aspect of the story that needs further scrutiny to assess the impact on the parties and brands involved.”
From a broader point of view, both brands also face the danger of the dispute escalating to the point where national authorities on either side take notice, Rudowski added.
“The key issues of brand-protection, consumer protection and resolving commercial disputes in China in this volatile year will be what to watch as the story unfolds,” he said. "The key to resolving this issue between Tesla and Pinduoduo is to contain this to a local commercial dispute, to prevent this from drifting into a wider Sino-US trade clash, which in this current political climate and election year will escalate it beyond its current scope.”
One thing that is certain is that brands can no longer consider the technology platforms as neutral parties, Rudowski added.
Consumer reaction has, unsurprisingly, fallen more on Pinduoduo's side.
"We see clearly that Pinduoduo is helping the consumer to get the car, and keep their promises," one fairly typical netizen's response said (below). "But Tesla is stopping consumers to get the car. Tesla is putting the consumer in a big fight, which is their biggest mistake. I think Tesla loses the fight because it forgets that consumers are the ones who are helping them."
Pinduoduo has predictably positioned itself as the champion of consumer rights. "We are disappointed that Tesla has made it difficult for some of their fans to get their dream car," a spokesperson said. "We appreciate the trust that our users put in our platform and will do everything we can do protect their rights. We put our consumers’ interests first and stand by them."
Some consumers see through this stance, recognising the promotion as a stunt by which Pinduoduo aimed to take advantage of Tesla's shiny, sexy brand image to enhance its own standing. Others seem to understand Tesla's desire to control its pricing and experience, but argue that the company should be more open to going with the flow of China ecommerce.
"If I am Tesla, I will also hate Pinduoduo," a user wrote (below). "But I won't blame it on consumers. And I don't think I can do anything to counteract Pinduoduo. Tesla has been a bit headstrong on its, thinking itself as omnipotent."
Carol Huang contributed reporting to this story.