The electric carmaker has been summoned by five Chinese regulatory agencies to answer questions about the quality of its Shanghai-made Model 3 cars, according to a statement released Monday by the State Administration for Market Regulation (SAMR). It said regulators were concerned about several problems with the cars, including “abnormal acceleration” and “battery fires.”
But for the past few weeks, Tesla has been heavily criticized within China for a series of problems involving its cars, culminating in Monday’s announcement.
“[We will] deeply reflect on the company’s operational shortcomings and comprehensively strengthen self-inspection,” Tesla said in a statement posted on Chinese social media website Weibo in response to SAMR’s remarks.
“We will strictly abide by Chinese laws and regulations and always respect consumer rights,” the carmaker said, adding that it will “better contribute to the healthy development of China’s new energy vehicle market.”
It’s not clear whether regulators intend to punish Tesla or change anything about the way it operates in the country. But the controversy is a sign of just how seriously Beijing takes regulation, even among companies that it appears to favor.
“It’s a slippery slope for Musk,” said Dan Ives, a technology analyst at Wedbush Securities. The CEO “had built strong relationships within the country, but he must play nice in the sandbox in China.”
Tesla has been in China since 2013, but in the past few years it has established a strong relationship with the Chinese government.
When the carmaker was negotiating terms with authorities in 2017 for the construction of its Shanghai Gigafactory, it managed to retain complete control — an unusual arrangement, since its peers were typically required to partner with Chinese firms if they wanted to set up a local business at that time. (China announced in 2018 that it would ease up on the automotive sector’s rules on foreign ownership by 2022.)
A souring perception
“We are deeply sorry, regarding the misunderstanding caused to netizens and the trouble” caused to power authorities, the company said.
The Global Times, a state-owned tabloid, also took the company to task.
Regulatory pressure is not Tesla’s only challenge in China moving forward.
The company was the best-selling electric vehicle brand in the country last year, with 135,400 Model 3s sold, according to the China Passenger Car Association.
But competition is getting fierce. BYD unseated Tesla as China’s top selling electric car brand last month, and other automakers like Nio, Geely and Xpeng are trying to close in.
While China has welcomed Tesla so far, experts point out that ultimately Beijing has its own ambitions to lead in tech and other fields. In other words: Once homegrown companies are competitive, the country doesn’t have much need for foreign firms anymore.
— CNN’s Beijing bureau contributed to this report.