Wednesday, 19 August 2020

PINDUO...DROSS: RATLAND IS A STACK OF EXCREMENT

 

Pinduoduo clashes with Tesla in China over discounted cars

Sales on Pinduoduo have sometimes been opposed by western brands, including Apple © Pavel Kapysh/Dreamstime

China’s Pinduoduo has clashed with Tesla after it sold the US group’s electric vehicles at a hefty discount, highlighting the ecommerce platform’s controversial use of big subsidies.

Pinduoduo, the most valuable company in the world to have never turned an operating profit, last month hosted a group-buying event in which Chinese shoppers could buy a Tesla Model 3 for significantly below its Rmb291,800 ($42,100) price tag.

But Tesla originally said it would not deliver the cars, pointing to a company policy that bans the resale of its vehicles. Tesla, which recently became the world’s most valuable carmaker, only sells its vehicles directly to buyers via its website, bypassing dealers.

Pinduoduo is well-known for offering customers generous subsidies, which it records as sales and marketing fees. In the first three months of this year, these fees were greater than its revenues. Analysts question if its business model can become sustainable.

Despite that, the group’s US-listed shares have surged 138 per cent this year to give Pinduoduo a value of roughly $110bn.

Rmb51
Average order on Pinduoduo last year

But analysts said the sales of the discounted Tesla cars had taken its use of subsidy-based marketing to a new level. Pinduoduo sold five Model 3s at about a 14 per cent discount, with the company and one of its online merchants making up the difference to the official price, according to Chinese media reports. 

Shawn Yang, managing director at Blue Lotus Capital Advisors, said the Tesla stunt suggested Pinduoduo was trying to shake off its reputation as a platform for cheap goods. Last year, its average order was worth just Rmb51. “It doesn’t want to stay that way and they’ve been doing a lot to let people know they have high-value stuff on their platform like iPhones or Teslas to try to attract high-value users.”

“It's all about marketing,” said another Hong Kong-based equity analyst. “Last year they sold Wuling [cheap minivans], this year they sold Cadillac and now they are selling Tesla. They want to get rid of their low-end image.” 

Pinduoduo was increasing subsidies to lift its growth but doing so only added to its losses, said one industry insider. “It’s an endless loop,” he said.

Sales on Pinduoduo have on occasion displeased Western brands, including Apple, whose high-end iPhones it sells with hundreds of dollars knocked off the retail price despite not being an authorised reseller. Apple declined to comment.

Tesla’s decision not to honour the Pinduoduo sales also yielded criticism of the carmaker, for which China is an important market. The group sold 45,721 vehicles in China in the first half of 2020, accounting for about a quarter of its total deliveries globally.

Qiu Baochang, an expert at the official China Consumers' Association, called Tesla’s actions “improper” and said they had “hurt consumers’ legitimate rights and interests”.

“Through giving a sizeable subsidy, Pinduoduo may have earned massive traffic, there is nothing wrong with that,” said Mr Qiu. Tesla did not immediately respond to a request for comment.

Tesla on Monday pledged unspecified compensation to those who ordered a car via Pinduoduo for “losses of time and energy” if they repurchased the vehicle through its own website.

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