Elon Musk, Tesla CEO, speaks at an opening ceremony of the Tesla China-made Model Y program in Shanghai on Jan. 7.

Aly Song | Reuters

BEIJING and GUANGZHOU, China – Tesla is facing increasing pressure in China as state media and regulators criticize the electric car maker after a suspected customer protested at a major auto show this week.

Tesla could face one of the worst PR crises in China that a market investor sees as critical to its future growth.

On Monday, a woman who claimed to be a Tesla customer stood on one of the company’s cars at the Shanghai Auto Show with a T-shirt that said “Brakes do not work” in Chinese. She protested an alleged braking failure in her car – an issue that other Chinese social media users who are alleged to be Tesla drivers have been complaining about in recent months. A video of the incident was viralized on Chinese social networks and recorded by state media.

On Tuesday, Shanghai police identified the protester by her last name, Zhang, and said she had been sentenced to five days in prison for disturbing public order.

Tesla alleged the woman was involved in a collision in February for “speeding” and in their two-month negotiations did not allow a third party inspection but insisted on a refund of the car.

Criticism of being “arrogant”

Tesla’s vice president for China, Tao Lin, claimed in an interview Monday with Chinese financial news outlet Caijing that the woman was hoping for high compensation and that the company had no reason to give it to her.

In a post on the Twitter-like service Weibo, Tesla said it would not compromise on “unreasonable demands”.

Both the state media and a government agency were quick to reprimand Tesla. State news agencies published a number of editorials, while the Chinese government’s Central Disciplinary Commission issued a warning.

The company’s arrogant and arrogant attitude towards the public is repulsive and unacceptable, which could seriously damage its reputation and customer base in the Chinese market.

Government-backed Chinese publication Global Times about Tesla

A state media article titled “Three Lessons Tesla Should Learn” advised the US-based electric car maker not to be “arrogant” and to “respect” the Chinese consumer market. This comes from a CNBC translation of the Chinese-language text.

“The company’s arrogant and arrogant attitude towards the public is repulsive and unacceptable, which could seriously damage its reputation and customer base in the Chinese market,” the state-backed tabloid Global Times said in a separate opinion piece Wednesday.

Tesla issued a statement apologizing for not resolving the car owner’s problems in a timely manner.

In two Weibo posts on Monday and Tuesday, Tesla said it was ready to work with authorities. The company said it will “self-examine and self-correct” to “fix” issues with its customer service process.

On Thursday, Tesla announced that it had given Zhang raw vehicle data 30 minutes before the accident in question. The company has also communicated with two market regulators.

Tesla’s rise in China

It was very much in China’s interest to let the leader in, but it is not in China’s interest to let the leader dominate the market.

Bill Russo

Founder and CEO of Automobility Limited

Read more from the Shanghai Auto Show

“It was very much in China’s interest to let the market leader in, but it was not in China’s interest to let the market leader dominate the market,” said Bill Russo, founder and CEO of consulting and investment firm Automobility Limited.

Russo noted that companies like Daimler’s and Volkswagen’s Mercedes engine have gone through similar stages of testing in the past.

Increasing control over Tesla

The negative press about Tesla in China has increased in recent months. Earlier this year, a Tesla Model 3 reportedly exploded in a parking garage in Shanghai, while a state media article reported that there were at least 10 reports in 2020 that Tesla drivers lost control of their cars in the country.

China has also reportedly restricted the use of Tesla vehicles by state and military personnel, amid concerns that the vehicle’s sensors could record images of their surrounding locations. Musk said his company would shut down if their cars could be used for spying.

Meanwhile, China’s market regulator, the state administration of market regulation, met with Tesla’s local subsidiaries in February to increase consumer reports on vehicle problems. On Wednesday, the regulator issued a statement attaching great importance to the incident at the Shanghai Auto Show. The agency said it directed local regulators to protect consumer interests.

Musk tried to fend off control. In March, he gave an interview to the state broadcaster CCTV in which he said China’s future will be “great” and the country will be Tesla’s “largest market”.

– CNBC’s Yin Hon contributed to this report.