After a rough start, suddenly it’s all going Tesla’s way in China

Tesla Motors didn’t get off to the greatest start in China. In fact, it was barely a year ago that the company was announcing it had sold just 120 cars in China and that rumors of large-scale layoffs were swirling.

What a difference a year makes.

Today, things are looking brighter for Tesla in China than they ever have, and the good news has been flying thick and fast in recent weeks.

First and most important: Tesla finally has a hit on its hands. We knew China was excited about the idea of the company’s lower-cost Model 3, but now the company has shared that thanks to a flood of preorders, China is now the Model 3’s second-largest market. Specific numbers weren’t disclosed, but Musk said last month that the Model 3 had attracted a total of around 400,000 preorders so far. Given that, it’s reasonable to assume that Chinese preorders number at least in the tens of thousands, and may well have cracked 100,000. That’s a pretty far cry from the 120 cars Tesla was selling in China a few years ago.

Tesla tries to poison its own car.

But the company has also turned heads in China recently with its demonstration of its “bioweapon defense mode.” Earlier this week, the company put its Model X into a bubble filled with extremely dangerous levels of PM2.5 air pollution, then turned on the car’s seals and filters and got the interior air down to negligible levels in under two minutes. The stunt has garnered a lot of attention in China, where PM2.5 levels often reach hazardous levels. The positive press Tesla has gotten could spark a spike in Model X sales, but even if it doesn’t, it’s great branding for future vehicles that might include similar systems at lower price points.

Things are finally looking bright for Tesla in China.

Finally, there’s the news that Tesla is seriously considering setting up a factory in Suzhou, China. This would allow the company to ramp up production while probably lowering its price points slightly in China. As foreign products, Tesla cars would still be subject to China’s heavy import duties but Tesla could cut the costs of shipping the vehicles overseas out of the Chinese list prices. Plus, the existence of a China factory would likely lead to a greater Tesla executive presence in China, as well as more PR and branding opportunities.

Telsa is up against some stiff domestic competition, of course. The way forward will not be easy. There are dozens of competitors, from established auto firms like BYD to internet upstarts like LeEco. Just yesterday, another potential competitor raised US$120 million to upset the Chinese auto market. But Tesla does seem to be carving itself a niche at the higher end of the electric vehicle market, and the hype it has built in China over the past few months will be tough even for local competitors to contend with.

In other words: things are finally looking bright for Tesla in China. When Elon Musk visits his China team later this year, I expect there will be a lot more high-fives and fistbumps than threats and layoffs.