ATTACK OF THE CHINESE TESLA CLONES

Attack of the Counterfeit 
CHINESE TESLA CLONES

IF THERE’S ONE place you can knock the Tesla Model S, a carso good it “broke” Consumer Reports’ rating system, it’s cost. The electric sedan is crazy expensive, starting at $71,000 and topping six figures fully loaded. The Model X SUV unveiled last month runs $143,000 decked out with a nice trim package.

To temper its elitist image and lure more consumers, Tesla promises to launch the smaller, more affordable Model III in 2017. CEO Elon Musk hopes the car’s $35K sticker price sends a positive message to investors and critics who question the company’s long-term potential for profitability and growth. After all, it’s one thing to sell 50,000 cars a year to rich people. It’s quite another to sell hundreds of thousands of cars to those who are merely well off.

In China, though, where non-union labor remains cheap, supply chains are as supple as they are massive, and attitudes toward intellectual property are quite lax, some aspiring auto barons think they can undercut Tesla by, well, ripping off Tesla. These brash entrepreneurs plan to build near carbon copies of the Model S and sell them for significantly less than the real thing.

Tesla isn’t alone in fighting counterfeiters. Land Rover tried and failed to stop a Chinese firm from producing a mirror-image of its popular Evoque SUV. But those looking to crib from Musk are aided by the fact Tesla made much of the technology underpinning the sedan open-source. And demand for EVs is mounting. The exploding market for automobiles raises grave concerns about air pollution and climate change, which is why Beijing wants to see five million “new energy cars” throughout China by 2020. Tesla’s at a disadvantage there, because its cars are subjected to high taxes in China and aren’t granted the same tax breaks awarded to home-grown EVs.

Musk is eager to expand in China, but may well fall victim to the clone war.

Meet the Clones

The Tesla clone that may have the best chance of making it past the concept stage is dubbed Le* Car. (The car was cribbed from Tesla, and the name, perhaps, from Renault.) It is a side project of LeTV, a wildly successful streaming subscription service that Bloomberg News called “the Chinese Netflix.” It was conceived by Jia Yueting, the billionaire behind China’s top-selling smart TV and a phone that sold 200,000 units in the first few seconds of its release. Le* Car is perhaps best described as a Model S with European hypercar styling, and it’s slated to debut at the Beijing auto show in April.

The teaser sketches are frustratingly vague (what, no side mirrors?) and heavy on the chiaroscuro, but there’s reason to believe the Le* Car is for real. Tony Nie, the founder of Lotus Engineering in China, is leading the project, and he’s hired a team of 600 to develop the car. Some of the talent reportedly was poached from companies like General Motors, BMW, and Tesla.

Le* Car’s specs and cost are still anyone’s guess (the company says pricing will be “very competitive”), but we know the motor, inverter, and battery technology are being developed in-house.

Mr. Nie envisions the new electric car as a luxurious portal on wheels, another shiny platform for his boss’ increasingly lucrative content business. In August, Yueting cashed out $1.2 billion worth of stock in his company, then loaned the money to LeTV, presumably to put the car on a fast-track. Production is slated to begin in early 2018.

At the other end of the clone spectrum is the Youxia Ranger X from Huang Xiuyuan, a 28-year-old Chinese entrepreneur who favors polo shirts and black horn-rim glasses. A team of 50 engineers and designers reportedly put the car together in just 16 months, which doesn’t seem impossible given the car appears to be the Tesla’s identical twin. The body and interior are lifted directly from a Model S with some styling cues cribbed from Lexus, Audi, and Maserati. The wheelbase, door pillars, and interior details, including all instrumentation, seem identical to the S.

The “Youxia” handle is borrowed from the Chinese name forKnight Rider, the Reagan-era TV series starring David Hasselhoff and talking Trans Am. The Ranger X has elements of the 80s car, but it’s really a shameless Model S copy.

In addition to the hidden door handles and the obligatory 17-inch console touchscreen (“It’s all so science fiction!” reads the ad copy), the Ranger X comes with Tesla-like specs. If the Youxia engineers can actually deliver these numbers, the performance will be more than adequate. Powered by Panasonic cells, the asynchronous electric motor will generate 348 horsepower, which translates to 0-62 mph in 5.5 seconds and a top speed of 140 mph. That’s not as quick as the Model S, but the 30-minute “turbo” charge provides a generous 286-mile range, a shade better than what Musk can do.

Silent acceleration can be a buzzkill, but don’t worry. The car’s stereo system will pipe some booming internal combustion sound effects into the cabin. Choose from the new Ferrari 488 GTB, the Ferrari LaFerrari hypercar, or the Jaguar F-Type.

China isn’t the only player in the Tesla clone war. At the Frankfurt Motor Show last month, a Taiwanese company raised eyebrows when it announced the Thunder Power e-car would have a 373-mile range, 108 miles more than the Model S. The automaker promises Tesla-like performance, too: 430 horsepower rocketing the car to 62 mph in less than 5 seconds and a top speed of 155 mph. A sportier Thunder Racer is in the pipeline.

Like with the Youxia Ranger X, the talent behind the Thunder Power sedan cannot be dismissed lightly. The famous Italian design studio Zagato is responsible for the body. Other notable hires include former Bugatti (as in Veyron) technician Dr. Peter Tutzer to oversee the development of the sporty e-car, and chief production officer Franz Schulte, a seasoned exec who has served at Porsche and Ford.

Thunder Power says it’s testing a working prototype in Milan, and plans to launch the vehicle in Europe by the end of 2017, with a rollout in the Chinese market scheduled for the following year, for $62,730. Not a steal, but still far cheaper than a similarly equipped Model S. Thunder Power’s long-range objective is to enter the US market and compete head-to-head with Tesla.

Tesla is not amused. In a statement, a spokesperson said, “China has shown a commitment to sustainable transportation, and Tesla is committed to helping in those efforts. We’re happy to see Model S and Tesla’s business model used as benchmarks for improvement. We opened our patents to encourage good faith use of our technology, not to facilitate creation of Tesla knockoffs, which neither advance innovation, nor help the EV movement. And, consumers know the difference between competition and copycats.”

It’s Happened Before

Tesla isn’t the only victim in the Asian clone war. The Land Wind X7 is a line-for-line forgery of the 2015 Range Rover Evoque luxury SUV. Jaguar Land Rover boss Ralf Speth complained he was “powerless” to stop the X7 because Chinese law does not consider vehicle design protected intellectual property.

Engineers and marketing people don’t understand what it takes to build a car company from scratch and make it last. The last guy to do it was Walter P. Chrysler in 1924.JOHN VOELCKER, EDITOR OF GREEN CAR REPORTS

The X7 costs a mere $21,288; a similarly equipped Evoque is $60,654. Before sales started this summer,Bloomberg reportedmore than 5,500 people had already ordered the car.

That said, what are the chances the clonemakers will succeed? Joe Dematio, the deputy editor ofRoad & Track, says it’s more likely than some industry analysts might think. “Five years ago, I didn’t think Tesla would become a viable business. Today, though, they make a really good car. There’s no reason to believe that a Chinese company can’t do the same thing.”

John Voelcker, the senior editor of Green Car Reports, is less bullish. “With enough money, talent, and a little luck, the Chinese could do the same thing Tesla did.” He pauses before lowering the boom. “But I’m still skeptical. Engineers and marketing people don’t understand what it takes to build a car company from scratch and make it last. That’s a tough thing to pull off. The last guy to do it was Walter P. Chrysler in 1924.”

Some people think Elon Musk has a shot at being the next Walter P. Chrysler. But that’s hard to do without a serious presence in China, the world’s largest auto market. Musk has been trying: When Tesla began delivering its Model S there last spring, it built 52 Supercharger stations in 20 cities and established a network of about 800 other charging stations at malls, hotels and restaurants in more than 70 cities. Despite the build-out, sales have been anemic. Last year, Tesla sold just 3,500 cars in China, far fewer than Chinese competitors like BYD and BAIC. At this rate, Musk’s goal of selling 500,000 cars a year in China by 2025 seems far-fetched.

One thing Mr. Musk probably didn’t envision was that a handful of Asian startups, backed by serious money and talent, would answer his challenge and start making counterfeit Teslas.

Part of the problem is that every Tesla sold in China gets slapped with a “luxury markup” and sells for $120,000, and China’s generous tax break for clean energy vehicles only applies to local manufacturers. National subsidies for electric passenger cars, which were set at $5,700 to $9,800 last year, and local government incentives, slash the price of Chinese-made e-cars even more. That’s more than a house edge—it’s a stacked deck.

Musk has said he wants to build a factory in China within the next several years, a strategic move that could dramatically reduce the Model S sticker price. The question is: With the Tesla clone war heating up in Asia, can he afford to wait that long? The new Chinese e-cars, with their comic book names and Crazy Eddie prices, might be whisking Foxconn executives through the streets of Shenzhen by then.

Ironically, Tesla likely helped jumpstart the clone war. The company’s pro-environment stance and full disclosure policy regarding proprietary tech has been the catalyst. Speaking at the Automotive News World Congress in Detroit last year, Musk explained the logic behind sharing his bulging patent portfolio with the rest of the auto industry. “Real environmental benefits will only happen if the big car companies make risky decisions to make electric vehicles,” he said. “I hope they do. We’ll try to be as helpful as we can.”

Tesla’s competitors haven’t yet built a direct competitor to the Model S. They’ve been making more affordable options with 100 miles of range or less, like the BMW i3, whichprovoked laughter from Musk during a 2013 earnings call. Luxury automakers like Audi, Bentley, Rolls-Royce, and Lamborghini are also working on electric offerings. Those automobiles, however, will likely cost more than anything Tesla sells, so shouldn’t steal too many customers.

One thing Musk probably didn’t envision was that a handful of Asian startups, backed by serious money and talent, would answer his challenge and start making counterfeit Teslas. All the open source altruism, combined with the flagrant theft of Tesla’s Silicon Valley chic designs, may come back to haunt the man credited with inspiring Robert Downey Jr.’s Iron Man.

Before long, some Asian billionaire will make an exact sheet metal copy of the Tesla Model X, complete with panoramic windshields and sensor-laden “falcon” doors. Until then, Youxia is now accepting Thunder Power pre-orders in “Pikachu Yellow” or “Transformer Red.”