Tesla's Cars Are On The Move In China, But For How Long?

Just like the media had reported, Elon Musk really was in China on Tuesday. He was on hand to deliver Tesla's first eight units of the Model S to Chinese customers. Additionally, Musk was also apologizing to some unhappy consumers for the delayed delivery of their cars.

But most importantly, Musk was here to see through what may be his biggest challenge in China: To ensure Tesla drivers will have access to an adequate supply of electricity through a network of charging stations. Otherwise, his Model S is at risk of becoming a  piece of artwork sitting in the parking lot. (Garage is not a familiar word for Chinese as high-rise is common.)

On WeChat – the main information source for scores of Chinese these days – the focus of discussion has switched from curiosity to skepticism–can the Model S actually survive on China's roads? The catalyst for the change in sentiment came from Musk himself during an interview he gave to CCTV News in which he discussed the lack of adequate charging stations.

Within 24 hours, the pundits were already detailing the complexities of China's power system and explaining why the task of building charging stations could turn out to be a major roadblock for Tesla going forward.

In order to ensure everything goes well, Tesla will have to overcome three big hurdles: the transmission of electricity from the grid to the charging stations that are owned by different companies, the approval of multiple levels of government officials and the lethargy of the state-owned grid operators.

English: Tesla Model S sedan (Photo credit: Wikipedia)

Easier said than done. And Tesla is not alone. Other Chinese carmakers that aspired to churn out electric vehicles that are even more friendly to the environment also ran into these very same issues. A case in point would be BYD BYD – Warren Buffet's pick. Even with the advantage of local knowledge, none of the domestic players have come up with a solution for these problems.

The key supplier of electricity to the charging units would likely be a company called NARI Group Corporation, a subsidiary of the State Grid and Sinopec, one of the oil giants, while the stations themselves would belong to a Beijing-based power generation company called Hanergy. In other words, Tesla will have to convince NARI, Sinopec and Hanergy to cooperate in finding a solution for Tesla's fuel problem. Moreover, the state-owned power grids may not be up to the task of producing the needed electricity to the network and require further investment and development.

Assuming that Musk could seal multiple deals with his various Chinese partners for the charging stations, he'll also need to win the support of countless government officials at the city, county and provincial levels. Tesla needs to convince the government at all tiers to facilitate the construction of charging stations in each of their territories he hopes to sell his cars.

Musk, in fact, is also busy trying to develop solar energy as another source of electricity, but then a new problem arises – a high cost would become a key concern.

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