Tesla, Inc. Sales in China More Than Tripled in 2016

By Daniel Sparks Markets Fool.com

As Tesla (NASDAQ: TSLA) prepared to begin deliveries in China in 2014, management was particularly bullish on the market. Indeed, Tesla's former China operations chief Veronica Wu estimated sales in the country would quickly grow to represent a third of the automaker's deliveries globally. But Tesla's initial predictions for the market proved to be far too optimistic. Sales in the market accounted for just 15% of total revenue in 2014 and fell to 8% of revenue in 2015.

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In 2016, however, Tesla hit a major turning point in the country. Tesla revenue in China surged higher in 2016, more than tripling compared to revenue in the market during 2015, according to Tesla's most recent 10-K filing (as pointed out by Electrek).

Tesla vehicles. Image source: Tesla Motors.

An unimpressive start

After beginning deliveries in China in October 2014, hype surrounding Tesla's expansion to the market faded quickly. Tesla realized a substantial portion of initial demand was driven by scalpers, and it dealt with some public relations missteps related to misperceptions about the difficulty of charging its electric vehicles in the country.

"I'd say that China was certainly a lot weaker than expected," Tesla CEO Elon Musk said in an interview at the Automotive News World Congress in January 2015.

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Despite initial challenges in the market, Tesla remained confident in the market's long-term potential, and Musk said he believed the company's situation in the country was temporary.

Tesla spent 2015 working on its image in China, including a massive expansion of its Supercharger locations. Between the beginning of December in 2014 and the beginning of January in 2015, Tesla added 16 new Supercharger locations in just 30 days, bringing total Supercharger locations in China to 56 in early 2015.

Supercharger. Image source: author.

Tesla's aggressive investments in China continued. Today, Tesla has 114 Supercharger locations in China. Further, Tesla has dramatically expanded its footprint of stores and service centers. Tesla now has an impressive 23 stores and 9 service centers in China.

From $319 million to $1 billion

Tesla started to see signs of a recovery in the second half of 2015. After orders for Model S nearly doubled between Q1 and Q2, Tesla said Model S orders "increased substantially" in Q3 compared to Q2. And management indicated this growth was poised to continue.

"We expect order growth in China to remain strong with more store openings and the recent policy changes in Beijing and other major cities that allow buyers of Tesla vehicles to bypass license plate restrictions," Tesla said in its Nov. 3 third-quarter update.

Tesla's predictions for sustained order growth in China have proved accurate, as Tesla's revenue in China surged from $319 million in 2015, or 8% of revenue, to about $1.1 billion in 2016, or 15% of revenue.

China has undoubtedly proved to be a key catalyst for Tesla. It just came later than expected and after a couple detours.

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Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.