Tesla has recently unveiled the new Model Q, priced at 180,000 yuan. However, given the low production costs at its Shanghai factory in China, estimates suggest the price could plummet to as low as 140,000 yuan, highlighting Tesla's ambition to further penetrate the Chinese market.

While some speculate that Tesla aims to leverage the popularity of the Model Y to strengthen its grip on the Chinese market, a closer examination of European data reveals a different story. Tesla has suffered a significant setback in Europe, potentially prompting its sudden decision to bolster its presence in China. This isn't the first time the Chinese market has come to Tesla's rescue.

German market data shows Volkswagen and BMW leading the electric vehicle (EV) segment with sales of 56,000 and 38,000 units, respectively, in the first 11 months of this year. Tesla lagged behind with 34,000 units sold. Additionally, Tesla faces stiff competition from Mercedes-Benz, Skoda, and Chinese brands in Europe.

Mercedes-Benz and Skoda's EV sales are growing rapidly, reflecting their increasing presence in the global EV market. Skoda, a Volkswagen subsidiary, targets the lower end of the market with its pricing strategy, occupying a niche through price differentiation. When combined, Volkswagen's EV sales surpass those of BMW and Tesla.

As Chinese automakers rise to prominence in the EV sector, Chinese EVs are making significant inroads into the European market. SAIC MG leads the way with a 3% market share in Europe, primarily due to its established reputation as a former European brand.

Upon entering the European market, Tesla swiftly became a leader in the EV segment. However, local European brands have since outpaced Tesla, leading to the Chinese market becoming Tesla's most critical overseas market after the United States.

The Chinese market has previously rescued Tesla from financial turmoil. In 2018, Tesla overcame the so-called "production hell" in the U.S. and doubled sales with the Model 3. However, sales stagnated in 2019 until the establishment of the Shanghai factory.

The Tesla Shanghai factory commenced mass production in late 2019, showcasing China's rapid development pace. Construction and production commenced within a year, a fraction of the time taken by Tesla's U.S. and German factories. This factory has been instrumental in Tesla's resurgence.

The Shanghai factory's significance is twofold: it opens up the Chinese market and leverages China's low-cost production advantages. Data from 2021 reveals that Tesla's global sales reached 936,000 units, with the Chinese market contributing 484,000 units. Furthermore, the Shanghai factory's production costs are over 60% lower than those in the U.S., allowing exports to markets like Japan and Europe (excluding the U.S. and Canada). In 2023, the Shanghai factory accounted for over half of Tesla's global production.

With the European market facing severe challenges, Musk realizes that China holds the key to breaking Tesla's stalemate. Encouragingly, Tesla has witnessed steady sales growth in China since the second half of this year, with weekly sales exceeding 20,000 units, ranking first in the luxury car market.

The Chinese market still holds vast potential. While Tesla's Model 3 and Model Y are priced above 200,000 yuan, the largest sales volume in China occurs in the sub-200,000 yuan price range. To further boost sales, Tesla must delve deeper into this market segment, explaining the sudden promotion of the Model Q, expected to launch in the first half of next year.