What Tesla must change to compete in China

Tesla Motors is making a move into the Chinese market, but first it has to change at least one thing about the electric Model S: the backseat.

Asked about the company's plans for China during a conference call for investors Wednesday, CEO Elon Musk declined to go into detail, saying he would save that for next quarter's call.

He did mention the challenge of adapting the Model S to a market where premium cars are commonly driven by chauffeurs, not their owners.

The Model S, Musk said, is a "driver's car" — its power and handling earned it Consumer Reports' highest score ever. To capture a big chunk of the Chinese auto market (the largest in the world for premium sedans), Tesla has to make the backseat just as appealing as the driver's seat.

The change, Musk said, will be from the current "family backseat" to an "executive backseat."

Tesla isn't the only American company making adjustments for Chinese customers. Ford made a few changes to the second row of its Kuga (known here as the Escape), and GM built a luxury minivan to cater to executives.

But there are other, more significant challenges to selling a foreign electric car in China, including a dirty power grid and huge import taxes. But Tesla is expected to open a showroom in Beijing later this year, its first in the country.

In Wednesday's conference call, Musk also laughed off the i3, BMW's new electric compact car. Tesla announced an unexpected Q2 profit of $0.20 per share, beating expectations for a loss of $0.19 per share.

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