Tesla Optimizes Insurance Incentives in China to Reduce Logistical Load at End of Quarter

Photo: @JayinShanghai/Twitter

Tesla has optimized the insurance incentive scheme in China to encourage orders until the end of November. The move will ease the burden on logistics at the end of the quarter by delivering more vehicles to the local market in Q4, while some of the already produced vehicles can be on the way and arrive in distant countries at the beginning of the new quarter.

Tesla said it raised the insurance incentive for Chinese car orders placed before November 30, but lowered it for orders made in December to encourage consumers to place orders earlier. The company previously offered an insurance incentive of RMB7,000 ($965) for orders placed between October 1 and December 30. But on Tuesday, Tesla said the incentive for November had been raised to RMB8,000 ($1,100). At the same time, it was reduced to RMB4,000 ($550) for orders placed in December. The insurance incentive is a cash rebate offered to buyers to buy insurance from Tesla's partner insurers.

This optimization of the insurance incentive indicates that Tesla is committed to delivering as many cars as possible domestically before the end of Q4. As is known, in Q3 of this year, the manufacturer upgraded the production lines at its Giga Shanghai, which led to an increase in factory capacity. However, logistics has not kept pace with the company's growth, and as Q3 results showed, thousands of vehicles were not delivered on time. Orders in China made earlier will be delivered to the domestic market in December, while cars produced at the end of the quarter can be on the way and arrive in distant countries at the beginning of the new quarter. Rising demand in China, where Giga Shanghai is located, will relieve pressure on maritime transport, which is currently under pressure.

It is reported that maritime haulers are experiencing difficulties. For example, Wallenius Wilhelmsen refused to export cars from Europe to the US from all automakers for October and November, and possibly December due to a big load at local ports. Occupancy at European ports remains extremely high, with Tesla imports from China being one of the main factors, Dan Nash, head of vehicle carriers and roll on/roll off carriers at VesselsValue, told CNBC. The global fleet is short approximately 13 vessels compared to December 2019, according to VesselsValue data. “This is a result of excess scrapping of vessels in the first year of Covid-19. This wait time is expected to last until 2024 when the newly built vessels start to be delivered,” Nash said.

In addition, Tesla would also like to change its delivery model. After about 20,000 produced-in-Q3 vehicles were still on their way after the quarter ended, the company faced some criticism. However, speaking at the 29th Annual Baron Investment Conference, on November 4, 2022 in New York, Elon Musk clarified that this position is good for Tesla in the long run—that it will help smooth out deliveries and actually have cars on their way at the end of each quarter. This will mean that the company will not have to rush to deliver all the cars by the end of the quarter and pay all the expedite fees.

© 2022, Eva Fox | Tesmanian. All rights reserved.

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