US electric vehicle giant Tesla will begin exporting its China-made Model 3 sedans to a dozen of European countries this month as it faces dual pressures of plunging sales in Europe and slower-than-expected growth in China, according to persons familiar with the matter.

Why it matters: Excess inventory at Tesla’s Gigafactory Shanghai is piling up as the EV maker’s brick-and-mortar showroom expansion in China—particularly in lower-tier cities—struggles to keep up.

  • The California-based automaker also aims to make up for lost ground in Europe where sales have plunged this year due to the pandemic and growing competition.

Details: Tesla will start shipping China-made Model 3 vehicles to a dozen or so European countries including Germany and France on Tuesday with deliveries scheduled for December, as the Shanghai facility’s production has sufficiently ramped up to fulfill local demand, the company said on Monday.

  • In an announcement sent to Chinese media, Tesla said that the company is striving for a breakthrough in business development, including doubling production capacity, sales, and charging locations by end-year.  
  • Tesla’s sales have not keep pace with accelerating production in China, people with the knowledge of the matter told TechNode on Wednesday. Existing showrooms have achieved significant operational efficiency; the company needs to expand its presence with more locations, the people added.
  • The US EV giant currently runs a sales network of 105 retail locations in 33 Chinese cities, and nearly half are located in the four top-tier cities. It has only a dozen retail stores across more than 600 Chinese third- and lower-tier cities, according to information on its official website.
  • To compare, Chinese EV maker Nio operates more than 150 retail locations across 91 cities, and Xpeng Motors operates around 130 stores in about 60 cities.
  • Tesla’s China-made Model 3 is the top-selling EV model in China with around 80,000 units delivered in the nine months ended Sept. 30, according to figures from the China Passenger Car Association (CPCA).
  • Tesla did not respond to a request for comment.

Context: The significantly lower sticker price for the China-made Model 3 is expected to help Tesla gain a competitive edge in the European market.

  • The company slashed the starting price of its Shanghai-made sedan by nearly 10% to RMB 249,900 (around $37,550) earlier this month, Reuters reported, thanks to the cheaper lithium iron phosphate (LFP) batteries reportedly supplied by Chinese battery giant CATL. The model currently sells for €46,600 ($55,220) and above in France, according to an Electrek report.
  • Tesla’s global sales grew 21% year on year to around 185,000 units in the first seven months of this year. However, its sales in Europe fell 23% to 38,000 units over the same period, according to figures from automotive market research firm MarkLines.
  • Europe is the the only region where Tesla’s sales have plunged, owing to business interruption caused by the pandemic and growing competition from local auto giants including Renault and Volkswagen.
  • Renault’s Zoe mini all-electric surpassed Tesla Model 3 to become the best-selling EV model in Europe with 36,573 units sold during the first half of this year, Bloomberg reported.

Jill Shen

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen