Tesla CEO Elon Musk made a surprise visit to China on April 28 and immediately met with Chinese Premier Li Keqiang. The China Association of Automobile Manufacturers issued a notice on that day stating that Tesla’s vehicles produced in Shanghai meet safety regulations. Meanwhile, foreign reports mentioned that Tesla has received approval from Beijing to launch its Full Self-Driving (FSD) technology in China.
Experts analyzed that the sudden step back by the Chinese authorities from their previous pressure on Tesla indicates a strategic move to leverage Tesla’s capabilities in areas such as smart networking to boost China’s overall technological advancement.
US Secretary of State Antony Blinken left China on April 26, and just two days later, Elon Musk arrived in China on a private jet for a brief visit that lasted less than 24 hours.
Musk’s visit to China was unexpected, without prior announcement, and he had canceled a trip to India on April 22 just days before. In a departure from his usual itinerary, Musk went to Beijing rather than Shanghai and even met with Premier Li Keqiang at the Zhongnanhai compound.
According to Xinhua News Agency, Premier Li Keqiang described Tesla as a “successful example of Sino-US economic and trade cooperation” and emphasized that the Chinese market is always open to foreign enterprises, ensuring that “foreign businesses can invest in China with peace of mind.”
On the same day, the China Association of Automobile Manufacturers issued a notice stating that compliance checks were conducted based on regulations such as “Regulations on Automobile Data Security Management (Trial)” and “Safety Requirements for Automobile Data Processing.” The review covered aspects like anonymization of facial information outside the car, no default collection of cabin data, internal processing of cabin data, and prominent notification of personal information handling. A total of 76 models from six companies, including Tesla, BYD, Li Auto, Great Wall Motors, NIO, passed the inspection.
Of note, Tesla was the only foreign company among those approved. All Tesla vehicles that passed the inspection came from the Tesla Shanghai Gigafactory and encompassed all models.
By meeting China’s national vehicle data security standards, Tesla is set to lift the restrictions that various Chinese government levels imposed on the company previously.
Prior to this development, Tesla faced widespread suppression in China. Reports indicated that since last year, Chinese authorities, citing safety concerns, restricted Tesla vehicles from entering not only military compounds but also an increasing number of government agencies, local government institutions, highway operators, and even cultural and exhibition centers.
During Musk’s 24-hour visit to Beijing over the weekend, the Chinese government made another concession to Tesla. According to reports from The Wall Street Journal and other media outlets, sources revealed that Chinese officials informed Tesla that they have preliminarily approved the implementation of Tesla’s FSD technology in China.
Multiple media reports also mentioned that Tesla is collaborating with Chinese search giant Baidu to deploy road mapping and navigation in China. Under the agreement, Baidu will allow Tesla to use its lane-level navigation system.
Just last week on April 26, Tesla’s Vice President for External Relations in China, Tao Tao, commented on the People’s Daily social media account, stating that autonomous driving technology will become a new growth engine for the electric vehicle industry.
In his observation, commentator Qin Peng stated that adding FSD functionality in China can provide Tesla with an advantage over its Chinese competitors from a revenue and competitive perspective. However, challenges also arise – Musk hopes for Chinese authorities’ approval to export data from Chinese customers stored in China to the US for training, a task that is challenging considering the geopolitical climate.
The article in Hong Kong’s Economic Journal questioned if exposing autonomous driving technology, which involves national road information, real-time video, traffic data, and passenger privacy, could have implications for national security. Opening such a sensitive area to a US company might have underlying motivations from the Chinese government.
Many on the Chinese internet expressed concerns that promoting Tesla’s FSD technology in China could lead to greater consequences, such as the theft of core technology by the Chinese government.
Electric vehicles are one of China’s promoted “Three News” items. The rapid rise of domestic new energy vehicle manufacturers in China is attributed to Tesla’s comprehensive patent policy. For example, BYD has utilized over a hundred Tesla patented technologies.
Within Tesla’s open patents, there are 213 technology invention patents covering areas like batteries, electric motors, electronic controls, vehicle manufacturing, human-machine interaction, and charging stations.
Moreover, Tesla’s Shanghai Gigafactory has achieved a localization rate of over 95% for parts, with more than 400 Chinese domestic tier-one suppliers signed with Tesla, of which over 60 suppliers have entered Tesla’s global supply chain system.
The sudden concessions made by the long-oppressed Tesla by the Chinese authorities have garnered attention across various sectors.
Qin Peng believes that the Chinese authorities have a clear strategy with four main objectives: firstly, to showcase China’s openness to attract more foreign investment; secondly, to further entice multinational corporations like Tesla to share their core technology in exchange for access to the Chinese market and more valuable data; thirdly, amid the tense international environment, treating Tesla favorably could serve as a political countermeasure against the trade wars initiated by the US and Europe; and fourthly, for long-term planning, to elevate China’s new energy vehicle industry comprehensively and enhance its international competitiveness.
He noted that the sudden backtrack by the Chinese authorities from their previous pressure on Tesla aims to leverage Tesla’s capabilities to enhance China’s overall technological capabilities in areas like smart networking. China sees this as an opportunity to excel amidst the intense global competition in the electric vehicle sector, positioning itself competitively in areas like artificial intelligence and energy storage.
“For China, they certainly want to acquire as much of Tesla’s technology and other components as possible because Musk possesses cutting-edge technologies such as the material foundation of the modern Starlink space chain, super-carry rockets, and spaceship technology,” Peng said.
In July 2018, Shanghai offered Tesla 860,000 square meters of land at just 10% of market value for production purposes. It also provided a 18.5 billion yuan loan at an interest rate of 3.9%, the lowest domestic market rate at the time, ensuring the completion and operation of the factory by 2019.
The extremely favorable policies granted to Tesla by the Chinese authorities back then aimed to facilitate Tesla’s local production in China to boost both upstream and downstream industries in the electric vehicle sector. Beyond the rapid growth of domestic electric vehicle manufacturers like Nio, Xpeng, and Li Auto, BYD has emerged as a formidable global competitor to Tesla. Recently, BYD surpassed Tesla to become the top-selling electric vehicle manufacturer globally, largely thanks to its affordable models.
The government subsidies for Chinese new energy vehicles have led to overcapacity, triggering a vicious price war among various automobile brands. According to the National Development and Reform Commission’s pricing monitoring data on April 23, ten models of new energy vehicles saw price reductions, with the BYD Song Plus New Energy (DM-i 110KM Flagship) experiencing the largest drop, from 154,800 yuan at the beginning of the year to 139,800 yuan, a 9.69% decrease.
Under the impact of the cutthroat competition in China’s new energy vehicle market, Tesla’s performance has been declining year by year.
Based on Tesla’s Q1 2024 sales data, the company reported global deliveries of 386,800 vehicles, an 8.5% year-on-year decrease, and a 20.2% quarter-on-quarter decrease from the previous year’s fourth quarter, hitting a new low in the past five quarters. This marked Tesla’s first drop below the 400,000-vehicle mark since Q3 2022.
Tesla’s stock price plummeted from over $400 during its peak in 2021 to below $140 last week, resulting in a market value decline of over $800 billion.
Starting from April 21, Tesla reduced prices across its vehicle lineup in China. The price adjustments encompassed all Tesla models including Model 3, Y, S, and X.
Furthermore, on April 5, Tesla announced a global workforce reduction of 14,000 employees, exceeding 10% of its total workforce. An informed source in China informed Phoenix Technology that the staff cut in China could reach up to 30-40% in some departments and up to 50% in specific units.