Tesla CEO Elon Musk unexpectedly traveled to China on Sunday to meet Premier Li Qiang, just one week after canceling a planned trip to India where he was to meet with PM Modi. Musk cited “very heavy Tesla obligations” as the reason for the cancellation.
Musk had intended to make a prominent appearance in India during the current election cycle to reveal multi-billion money investments in his satellite communications company Starlink and a new electric car facility. But, he ultimately postponed the explore, saying,”… but I do pretty much look forward to visiting after this yr”.
However, Musk’s China visit occurs at a tumultuous time for Tesla, characterized by declining Electric profits that have led to a major cost- decrease action, including cutting over 10 % of its global workforce.
Elon Musk’s China dependence: A tactical need
- Elon Musk’s ventures into China with Tesla have significantly shaped the electric vehicle ( EV ) landscape, both in China and globally. Musk first appeared to have an effective status as he entered the Chinese industry, gaining access to powerful figures, and influencing Tesla’s policy decisions.
- Tesla’s presence in China was significantly aided by important advantages, including plan adjustments and access to low-interest loans. Without a regional partner, which is uncommon for international companies in China, these opportunities were necessary for the establishment of the Shanghai plant.
- But, Tesla’s success in China has led to increased rivals and attention. As Musk helped create China’s EV business, he unwittingly strengthened his opponents, creating problems for Tesla in a business it helped revitalize. Due to Tesla’s reliance on the Chinese industry, which accounts for a sizable percentage of Tesla’s manufacturing and profits, Musk’s pro-China position is both a strategic requirement and a potential vulnerability.
What they are saying
- According to a New York Times statement,” Musk’s wealth is tied to Tesla’s Shanghai shop. The Shanghai stock has replaced Tesla’s grow in Fremont, California, as its largest and most effective, accounting for over half of the bank’s international sales and the bulk of its income”.
- He called himself “kind of pro-China” in an virtual talk with two congressional people in July, according to the NYT record.
- In stark contrast to his rogue image in the US, where he has reportedly mocked President Biden in tweets and called him a labor union shoe puppet, Musk responded to the pressure by becoming a high-profile cheer of China’s decision Communist Party, according to a Wall Street Journal statement.
- As per the WSJ review, in July, Musk expressed admiration for China’s economic efforts on Twitter, saying,” The economic growth that China has achieved is absolutely amazing, particularly in facilities”!
Why it matters
- Tesla’s success story in China has been a double- edged sword. While the Shanghai factory has become pivotal, accounting for over half of Tesla’s global deliveries, it has also made Musk vulnerable to Chinese leverage.
- He has praised Chinese leaders and supported China on contentious issues like Taiwan, possibly as a means of preserving favorable relations and strengthening Tesla’s position in the Chinese market.
- This is particularly concerning given that another of Musk’s ventures, SpaceX, handles sensitive US national security contracts.
- Musk’s interests in China have long raised eyebrows in Washington, with President Joe Biden saying in November 2022 that his links to foreign countries were “worthy” of scrutiny.
- For China, Musk is a welcome replacement for the flimsy language of US officials, which most recently surfaced during a visit by Antony Blinken, secretary of state.
The big picture
- A general trend of American tech giants who make the most of China’s vast market and manufacturing prowess only to become increasingly dependent on Chinese policies and economic trends.
- Tesla, which now sees the Chinese market as a major growth driver and a potential risk as a result of escalating geopolitical tensions, has a particularly strong dependency.
Between the lines
- The Chinese EV market has become more innovative and competitive because of Tesla’s presence there. Tesla’s switch to using locally produced batteries and parts has led to local suppliers developing technologies that are now being used by Chinese EV manufacturers, unintentionally aiding his rivals like BYD’s” Build Your Dreams.”
- In the final quarter of the year, BYD surpassed Tesla to become the world’s top seller of electric vehicles ( EVs ). Tesla regained its position as the world’s top EV seller in the first quarter of this year, but BYD continues to dominate the Chinese market.
- These Chinese manufacturers are now challenging Tesla’s dominance globally.
- Tesla’s reliance on the Chinese market for significant output and revenue sources also places Musk in a precarious position in the midst of tense US-China relations.
What’s next
- Significant aspects of Musk’s business will likely be affected by Tesla’s trajectory in China, affecting both the automotive and tech industries as well as potential US security interests.
- ” China’s game is n’t to let Tesla win”, Bill Russo, founder of Automobility, a Shanghai- based consulting firm, told WSJ. ” China’s game is to make the domestic industry compete”.
( With inputs from agencies )
