Author: Knight of Wanderer

Tesla once again stood at the top of public opinion with its ability to grab headlines, a height that is almost unattainable for Wang Feng in 100 years. This time, Tesla’s problem is the “0 Down Payment” car purchase model that was stopped just three days after it was launched.

A few days ago, Tesla launched the official “0 Down Payment” car purchase plan, whose official name is financial leasing. Consumers can freely choose a lease term of 1-5 years before purchasing a car and use the vehicle by paying monthly rent. After the lease period expires, they can re-acquire ownership of the vehicle, which is the lease-to-own model previously seen.

Taking Tesla’s Model Y priced at CNY 276,000 as an example, using the 5-year, 60-period financing lease method, the monthly rental cost is CNY 5,520, and the annualized interest rate is 4%. The total cost for five years is CNY 331,200, which is about CNY 55,000 higher than the full-payment option. If we look at it from the traditional point of view, it means an extra CNY 11,000 of interest per year. Although this interest is neither too much nor too little, thinking that it is a 0 down payment plan and only requires a Chinese ID card and driver’s license for signing the contract and immediate delivery, Tesla’s 0 Down Payment car purchase plan has received a lot of recognition as soon as it was launched.

It was unexpected that just three days later, Tesla stopped the purchase model. The official explanation given was that the plan caused a surge in orders, which might affect the delivery cycle and create a bad experience for users. (Users who have placed orders are not affected)

In plain words, too many people chose the 0 Down Payment car purchase option, and Tesla was suddenly unable to withstand such great pressure. Apart from the production capacity pressure caused by the surge in orders, this pressure also greatly tests Tesla’s financing leasing fund chain. Just imagine, if all 20 million vehicles Musk previously set as the target for sales in 2023 were to use Tesla’s 0 Down Payment 5-year financial leasing plan, which requires five years to pay back for a Model Y priced at CNY 276,000, then Tesla would probably be finished.

In the final analysis, Tesla underestimated the consumption power of the Chinese market.

Despite Tesla being in hot water due to negative news such as “frequent price cuts”, “fleecing customers”, and “brake failure”, which have made them a popular topic on the internet, consumers remain honest with their actions even if they say they won’t buy. In September, Tesla sold 33,033 Model Ys and 19,120 Model 3s, firmly occupying the second and third spots on China’s domestic new energy vehicle sales charts.

Moreover, due to reduced domestic deliveries caused by exports, official second-hand Tesla sales have also started to take off. In Guangzhou in August, there were still quite a few Model 3 second-hand cars in inventory, but now there are significantly fewer. This proves that the demand for Tesla vehicles in China has not yet peaked.

Therefore, in the face of Chinese consumers’ enormous buying power, Tesla has backed down. The zero-downpayment car purchase scheme, which was only online for three days, will probably not appear on any official Tesla sales platform again. However, Tesla will probably have to endure internet users’ taunts of “Are you playing a game you can’t afford?” for some time.

Although Tesla has removed the zero downpayment threshold, it has not entirely phased out the sales model of financing and leasing. Currently, on the Tesla official website, the minimum downpayment percentage for purchasing a new car is 10%, and there is a 1 to 5-year instalment period.

So, how much impact does going from zero downpayment to a 10% downpayment have on consumers? Using the Model Y as an example, which costs 276,000 RMB, a 10% downpayment would be 27,600 RMB, the financing amount would be RMB 248,400, the monthly instalment for a 5-year period would be 4968 RMB, the annualised interest rate would be 4%, and the total cost over 5 years would be 325,680 RMB. This is nearly 50,000 RMB more than the full purchase price. If you are interested in Tesla financing and leasing, you can make a simple comparison.The most deserving praise is that, compared to traditional “0 down payment” shops that require consumers to bundle other consumptions, Tesla’s 3-day 0 down payment is completely transparent without any gimmicks. It feels like we’ve just bought an item with installment payments and interest online. This fully transparent sales model is what consumers want most.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.