Tesla Clashes with Pinduoduo Over Group Buying of Model 3 Cars

Tesla and Pinduoduo are clashing over group buying promotions for heavily discounted Model 3 vehicles.

The US electric carmaker, which refused to deliver the car to a customer who had purchased it from the Chinese e-commerce site, citing its no resale policy, on Wednesday urged Pinduoduo to stop “manipulating public opinion for its own benefit.”

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The friction between the two companies started last month, when Pinduoduo partnered with auto trading platform YiAuto to launch a group-buying campaign, offering five random buyers the opportunity to purchase Tesla’s Chinese-made Model 3 vehicles at a major discount, on the condition that at least 10,000 people sign up. The campaign offered the vehicle for 251,800 yuan — 40,000 yuan less than the usual retail price.

Once Tesla was made aware of this campaign on July 21, it declared in a post on Chinese Twitter-like platform Weibo that it was not involved in Pinduoduo and YiAuto’s promotion, nor did it authorize the platform to sell its vehicles to customers. 

“If consumers have any disputes or damages to their rights due to the above group buying activities, our company will not bear any responsibility,” it added in the post.

The promotion campaign still went live on July 26 and one customer from Wuhan in China’s central Hubei province bought the car.

Last week, however, Tesla refused to deliver the vehicle to the Wuhan buyer as the company regarded the transaction a resale.

A screenshot circulating online showed that a Tesla sales representative told the buyer that “we suspect that this order is placed by Pinduoduo or other merchants in your name, which means concealing the real order information.” The sales representative also urged the buyer to order directly from Tesla instead.

“Tesla China has publicly stated on multiple channels that the official Tesla website is the only formal purchase channel for new cars, and it has never commissioned other platforms or merchants to conduct sales activities,” South China Morning Post reported, citing a statement sent by Tesla. 

Pinduoduo stated that the buyer had signed the contract with Tesla directly, and that the buyer has no intention to resell it. “For Tesla’s refusal to carry out this contract with consumers, as a subsidiary party, we regret this. We will support consumers to protect their rights in accordance with the law, and will actively implement vehicle delivery work.”

Pinduoduo added that its role in the whole process was to facilitate the flash sale and ensure that the auto dealer fulfilled the terms of the sale. It’s just a platform, but now because of the damages done to the user by Tesla, Pinduoduo is helping and standing by its users to protect users’ rights. 

For the Tesla promotion campaign, neither Pinduoduo nor YiAuto had the vehicles on hand. They ordered the cars for the five selected buyers at full price, using the personal information they provided, according to local reports.

“Pinduoduo placed the order using the customers’ personal information and conducted the final payment for the customer. We consider it an order resale. For any order involving resale, our company has the right to unilaterally terminate the agreement,” local media reported, citing a Tesla statement.

“If Pinduoduo conducted the payment to Tesla in the name of the consumer, and the consumer directly went to Tesla to pick up the car, it would be an entrusted payment,” Jiang Zhenxiang, vice president of the Guizhou-based Bijie Lawyers Association, told the local news outlet. “If Pinduoduo paid for the car in its own name and just indicated the number of cars it bought and then let consumers pick up the cars from Tesla manufacturers, it is a reselling behavior.”

Qiu Baochang, a lawyer with the Chinese Consumer Association, believed that Tesla’s clause does not prohibit consumers from looking for third-party payment when buying a car. Therefore, the behavior of the car owner does not violate the resale policy. And Tesla’s unilateral refusal to deliver the car is a breach of contract.

The California-based electric carmaker always sells cars to customers directly. When buying a Tesla, customers simply go to the store or order cars online. The price is what’s displayed, with no discounts or bargaining permitted. 

Furthermore, Pinduoduo‘s promotional subsidies will disrupt Tesla’s pricing system, according to Kang Jun, a Shanghai-based senior LMC Automotive analyst. 

“Pinduoduo‘s subsidies can be understood as a dealer offering a discount of 40, 000 yuan at the terminal,” Kang explained. “That is to say, even after the event ends, consumers will still have the idea of holding money for purchase, and will wait to see if other platforms have similar promotional activities.”

Kang said Pinduoduo’s promotion will also disturb Tesla’s overall production rhythm.

“Pinduoduo suddenly offers an agreement between users and Tesla. Although only five cars were sold, it will hint to consumers, and more people will make plans to purchase it. Tesla Model 3 is sold for about 10,000 units in China per month. If more consumers buy it through Pinduoduo’s platform, who would buy it on Tesla’s official website? This is certainly not what Tesla wants to see.”

On the evening of Aug. 18, local media reported that with the assistance of YiAuto and Pinduoduo, the Wuhan-based buyer successfully picked up the car and acquired insurance for the vehicle.

Subsequently, the buyer confirmed in an interview that he had successfully picked up the car in the evening, but that he had used the name of a family member as he had been “blocked by Tesla and could not buy it directly.”

On the following day, Tesla issued a statement saying that Tesla has never blocked any car owners. The statement also alleged that the trailers, signature documents and delivery procedures used throughout the delivery process did not comply with Tesla’s delivery specifications.

“We express our strong indignation at this practice of creating news through unilateral self-action and by maliciously misleading public opinion, and we advise relevant parties to abide by the bottom line of basic business ethics and stop playing with public opinion and consumer sentiment for their own benefit,” the statement said. 

Known for its heavy subsidies and group buying model, Shanghai-based Pinduoduo has over 628 million active buyers and has become one of China’s largest e-commerce platforms.

Previously, Pinduoduo was known for its popularity in smaller cities or rural areas. But in recent years it has been trying to attract more diverse customers from the nation’s most developed cities.

In the past, other high-end brands such as La Mer and Dyson have also pushed back against Pinduoduo, claiming they did not authorize the platform to sell their products. 

Last October, French luxury cosmetic brand La Mer released a Weibo statement announcing their exclusion of Pinduoduo from a list of authorized sales channels, after the platform offered discounts on La Mer facial creams in a group buying campaign.