According to Bloomberg, Tesla is working with used car traders in Beijing, Shanghai and Hangzhou to help buyers dump their old vehicles. That value is then deducted from the price of the customer's new Model S.
Tesla is still a rather new entrant into China but seems to be performing well. The company began selling the Model S there in April, and it only took a few months to deliver the first 1,000 vehicles. It didn't hurt that the initial pricing was lower than expected, the first 3,000 buyers in Shanghai have been eligible for a free license place, a roughly $15,000 value. According to Bloomberg, the electric automaker has opened nine stores and service locations in six Chinese cities, so far. The business is also considering opening a factory there at some point in the future.