- [Reporter] If you were on Chinese social media
at the start of the year
you might have come across this video.
It appears to show a Tesla Model 3 in flames
at a Shanghai parking garage.
(news anchor speaking in foreign language)
- [Reporter] The reports were widely watched and shared
on popular microblogging site Weibo
and messaging app WeChat.
In a statement to Chinese media,
Tesla said that nobody was injured
and the fire was likely caused
by something hitting the bottom of the car
and damaging the battery before it caught fire.
Tesla didn't respond to a request for comment
on the video in question.
Other videos appearing to show quality issues
in vehicles sold by the EV maker
have surfaced on Chinese social media.
And after a number of customer complaints,
Tesla was summoned by Chinese regulators
over safety concerns,
casting a shadow over Tesla's success story
in a country where the Model 3 Sedan
quickly became the best-selling electric vehicle.
- Tesla has been enjoying a honeymoon in China,
was viewed with adoring eyes by people who think
Tesla is associated with high tech.
But now with this accumulation of complaints
it's going to be quite a major issue.
- [Reporter] Quality issues aren't new for Tesla.
Manufacturing problems have prompted recalls
and investigations in the US.
In the past, Tesla has swiftly addressed
complaints from customers,
but in the world's largest electrical vehicle market
these quality issues could threaten Tesla's meteoric rise.
Tesla has pulled off some major feats
in the last couple years.
Globally, its car deliveries and market valuation
have grown quickly.
Tesla first entered the Chinese auto market in 2013
when it opened a showroom in Beijing
and started taking online pre-orders for its Model S.
- We're incredibly excited to break ground
on the Shanghai Gigafactory.
- [Reporter] In 2019,
Tesla became the fourth foreign car maker in the country
to run its own plant
without partnering with a Chinese company,
something local officials typically require
from foreign companies that want to operate in the country.
- We want to very much say thank you and appreciation
for the Shanghai government and their support.
- [Reporter] Yunshi Wang is the director
of a group at UC Davis
studying China's transportation energy sector.
- When Tesla entered China,
US and China were really in a middle of a trade war,
so there was a huge incentive to showcase
that China is open to the world,
is not discriminating against foreign investment.
- [Reporter] It took Tesla less than a year
to get its Shanghai plant up and running.
That's half the time it took to launch
its battery-producing Gigafactory near Reno, Nevada.
After getting funding from Chinese banks
and quick approval from officials,
Tesla was delivering its first Chinese-made cars
to local drivers by early 2020.
(upbeat music) (crowd cheering)
And in early 2021,
Tesla started delivering its Model Y cars.
Car sales in China brought in
more than $6.6 billion in revenue for Tesla in 2020
and helped the car maker reach
a record 500,000 global vehicle deliveries that year.
But then, in early 2021,
Chinese regulators reported an unusual uptick
of customer complaints about Tesla quality issues.
In this online video, for example,
a Tesla driver appears to complain
about the car accelerating
without the driver's foot on the pedal
with cruise control and autopilot functions
appearing to be turned off.
Tesla didn't respond to a request for comment
on this video.
(woman speaking in foreign language)
- [Reporter] Authorities say they held talks with Tesla
on the consumer reported abnormal acceleration
and battery fires,
warning the car maker that it needs to abide
by Chinese laws
and strengthen internal management
to ensure the quality and safety of its products.
It couldn't be determined whether the cars
in the videos circulating in China
were made in Shanghai.
The company said it would investigate the claims
and abide by the law.
It didn't respond to our request for comment.
Industry observers question whether the speed
at which Tesla scaled up production in China
could have affected the quality of its cars.
- Tesla was meeting a huge demand in China.
There was also some rush
that might contribute to the quality
and may not be able to provide quality products
in time to meet their demand.
- [Reporter] Tesla didn't respond to our questions
on whether production speed
may have affected quality in China,
but Elon Musk has acknowledged in a recent interview
that the company has faced production challenges.
- During that production ramp,
it's super hard to be in vertical climb mode
and get everything right.
- [Reporter] Industry analysts said
Tesla's response to regulatory scrutiny in China
differed sharply from the tone it has usually employed
with regulators in the US.
In 2018, Musk sparred with US regulators
as they investigated his tweets about taking Tesla private
when his company was in a cash crunch.
Tesla never ended up going private.
And in 2020, Musk initially defied
a California County government order
to suspend production due to coronavirus,
and at one point he tweeted,
"The coronavirus panic is dumb."
Tesla's issues in China right now aren't necessarily unique.
Other EV makers, including its rival NIO,
have also reported battery fires.
But transportation analysts say
Tesla needs to protect its reputation
in a market that already represents 20% of its revenue
and is expected to grow.
(upbeat music)
- I think Tesla has to be more careful
than Chinese local companies.
And they're bigger and they're perceived to be
a better company.
- [Reporter] Tesla's been allowed to operate
with relative freedom
thanks to a loosening of China's rules
for foreign automakers in 2018.
For instance, many foreign car makers like GM and Mercedes
were required to partner with local companies.
But the Silicon Valley company
faces increased competition from local startups,
including Li Auto and XPeng.
As it hopes to continue to gain ground in China,
pressure from regulators comes at a critical time for Tesla.
(gentle music)