NEW ENERGY: Tesla Takes New China Hit with Driver Death Lawsuit

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Bottom line: A Beijing lawsuit against Tesla over an accident that killed the driver of one of its cars is quite possibly baseless, but will add to a recent string of negative publicity for the company and China’s problem-plagued new energy vehicle sector.

Tesla sued over driver death in China

Electric car maker Tesla (Nasdaq: TLSA) is in the negative headlines in China driving into the new week, following reports of a Beijing lawsuit against the company over the death of a driver of one of its cars. I’ll be quite direct and say that the lawsuit looks a bit dubious and perhaps unrelated to Tesla’s technology, though it’s also possible that Tesla’s carefully worded statement is designed to give that impression. But even if the lawsuit is baseless, this kind of negative headline is the last thing that Tesla needs in a problem-plagued market that it once hoped would fuel its difficult drive into profitability.

Tesla was in similar negative headlines in China earlier this year following another minor accident reported by a driver using the autopilot function that has lately become the source of controversy. So this latest report of a fatality involving one of its cars is unlikely to help its image, even if the accident was purely the fault of the driver.

More broadly speaking, Tesla is also getting caught up in a much larger wave of negative publicity surrounding abusive practices in China’s new energy car industry, even though Tesla has never been accused of such practices. But again, all the negative publicity has been souring buyers on the technology in general, and prompted the nation’s largest trade association to sharply scale back its sales forecast for this year. (previous post)

All that said, let’s zoom in on the latest bad news for Tesla that comes in lawsuit filed by the family of 23-year-old driver of one of its cars who died in an accident in January. (English article; Chinese article) The victim’s family is seeking a very modest 10,000 yuan ($1,500) in damages. TV reports on the lawsuit also included footage from a dashboard camera that showed the car hitting a cleaning truck from behind while traveling on a highway in central Hebei province.

Modest Request

The extremely small size of the damage request is the first signal that perhaps the young driver and not the Tesla car were to blame for the accident. But we should also point out that China’s laws often cap the maximum damages in lawsuits at extremely low amounts, meaning a victory is often mostly symbolic. We should also note that the Beijing court could have rejected the case if it really felt the lawsuit was baseless, but instead decided to accept it and hold a trial.

The remaining information on the case comes from Tesla itself, which put out a statement expressing sadness at the driver’s death while also drawing attention to his young age by noting that the victim was actually the car owner’s son. Tesla also notes that it tried to work with the owner to determine the cause of the accident, but was repeatedly rebuffed. Again there’s nothing wrong with such behavior, though Tesla’s wording certainly tries to imply the owner may be trying to hide something.

The small sum of the damages, combined with the driver’s young age and his family’s unwillingness to cooperate with Tesla, all seem to hint that other factors like reckless driving may have been more responsible for the crash than faulty technology. But even if a court trial shows that’s true, it won’t do much to help Tesla’s image in China.

Barely a day seems to go by these last few weeks without the appearance of other negative headlines related to the new energy vehicle sector, most involving the dozens of domestic companies that have rushed into the space over the last 5 years. That bigger story involves many companies that defrauded the government in order to receive big subsidies aimed at developing the industry. Earlier this month Beijing directly accused 5 automakers of such fraud. (previous post)

The other big news for Tesla in China this year has been more positive, involving its reported plans to build a manufacturing facility in Shanghai. (previous post) But nothing has been reported on that since June, when the plan was supposedly on the cusp of being finalized. I expect that particular plan will go forward eventually, but all the recent negative news could put a damper on both the factory plan and also Tesla’s sales in the broader China market.

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