Tesla CEO Musk made an unexpected visit to Beijing on April 28 and met with Chinese Premier Li Keqiang. Following the meeting, China gave groundbreaking approval for Tesla electric vehicles, announcing that the vehicle data security of Tesla produced in Shanghai meets Chinese regulations. Moreover, Tesla’s Full Self-Driving (FSD) system is expected to be permitted for use in China.
With this news, Tesla’s stock price surged over 15%, closing at $194.05 on April 29. Analysts believe that although Musk and the Chinese Communist Party have their own needs, Tesla may become a showcase project for the Chinese government’s external propaganda, serving as a tool for manipulating public opinion.
Amid the rise of AI-related tech stocks, Tesla’s stock price had been declining continuously. On March 4, the stock price plummeted by 7.2%, dropping about 50% from its peak in 2021, which led to Musk losing his title as the richest person.
On April 15, Tesla announced a global workforce reduction of over 10%, and recently, it has been consistently lowering prices for various products. Currently, the cheapest Model Y in the US is priced at the lowest since its release, at $42,990, with price reductions affecting markets in China, the US, and Europe.
Regarding the key reasons for Tesla’s stock price decline, American media columnist Noah Smith mentioned in his personal blog about Tesla facing intense competition from Chinese car manufacturers in Europe, the Middle East, Southeast Asia, and revealed China’s five tactics for “killing market with subsidized products” for foreign companies. Smith pointed out that Tesla is facing the crisis of being squeezed out of the Chinese market.
Amid this difficult time, Musk’s sudden visit to Beijing, and the subsequent green light given by China to Tesla’s electric vehicles, have brought significant positive news to struggling Tesla, leading to a surge in the stock price.
North American investment advisor Mike Sun believes that Musk’s visit to Beijing resulted in an agreement beneficial for both sides, where Tesla needs to further open up the Chinese market and China requires Tesla’s artificial intelligence driving technology.
During the meeting with his “old friend” Li Keqiang, who invited him to establish a factory in Shanghai, Musk was praised for Tesla’s development in China, termed as a successful example of Sino-US economic cooperation. Li expressed hopes for more communication in strategic guidance between the US and China to promote the continued stable development of Sino-US relations.
On April 29, the American commentator Tang Jingyuan stated in his media program “Far-Sighted Commentary” that one of China’s goals is to establish Tesla as a showcase project for external propaganda, demonstrating favoritism towards foreign enterprises to maximize the effect of public opinion manipulation.
Multiple reports confirm that Tesla has partnered with Chinese tech giant Baidu, allowing Tesla to collect data on public roads in China and providing lane-level navigation systems to Tesla, clearing the final regulatory obstacles for Tesla’s FSD system launch in China.
The FSD system is an evolved version of the intelligent driving assistance system Tesla launched four years ago. Since 2021, China had raised concerns about Tesla’s data security, prohibiting Tesla vehicles from entering government institutions and military facilities. Additionally, Chinese regulatory authorities required Tesla not to transfer autonomous driving-related data collected in China to the US, mandating storing it in Shanghai. However, all these concerns seem to have been resolved.
China’s road conditions are complex, with widespread traffic violations. If Tesla can transmit the vast data collected in China to the US, it will provide rich data resources to enhance its artificial intelligence driving algorithms globally.
“China’s electric vehicle market is expected to face a severe oversupply of 20 million units by 2025, urgently needing technological upgrades to avoid severe market saturation. Therefore, the Chinese government’s main interest lies in Tesla’s Full Self-Driving (FSD) algorithm technology,” according to Mike Sun.
Mike further analyzed, “There is evidence indicating that after Apple suspended its autonomous driving car project, the Chinese government had discussions with Apple for technical cooperation, yet Cook ultimately did not agree. At this point, the conditions were offered to Musk as Tesla faced ongoing challenges in performance, trading technology for market presence. Selling second-rate technology is not bad as long as it complies with US government regulations, as in a few years, China could probably develop it on its own.”
The outcome of Musk’s visit to Beijing led to a significant increase in Tesla’s stock price, but some financial experts are skeptical about Tesla’s future. The chairman of Taiwan’s Wealth Magazine stated on an online program the day before Musk’s visit to Beijing that Tesla is currently deeply troubled by crises in China, and how to extricate itself from the Chinese market will be key to Tesla’s revival. The recent announcement of a 10% workforce reduction was primarily due to the challenging market environment for Tesla’s large-scale expansion in China.
He mentioned that in 2017, Musk was favored by the Chinese government when he decided to build a factory in Shanghai, with the condition that all of Tesla’s supply chain components be entirely made in China.
On April 29, independent media personality Cai Shenkun stated on X platform that “Tesla’s arrival (Shanghai factory) has stimulated the development of the entire new energy vehicle industry chain in China”, “From 2009 to 2019, the Chinese government provided subsidies exceeding over 200 billion RMB (about $27.6 billion USD), yet it still has not formed a competitive edge against foreign investments.” Cai Shenkun said that relying on the “catfish effect” of Tesla, China had realized the “dream of new energy vehicles”.
Data indicates that following Tesla’s entry into China, it rapidly established a comprehensive electric vehicle-related industry chain involving ten main parts, such as powertrain systems, electric drive systems, charging infrastructure, chassis, body, other components, central control systems, interior, and exterior, directly or indirectly involving over 130 suppliers, with Chinese companies occupying a significant portion.
In the core sector of the industry chain, over 30 suppliers are involved in lithium battery production, including CATL, Envision, and Cail. CATL has emerged as a global leader in power battery industry. In terms of in-vehicle communication, there are companies like Sensetime; central control systems include companies like Juesheng Electronics and Changxin Technology, while exterior design involves Top Group and Huaye Automotive, encompassing over 30 suppliers.
Tesla not only accomplished the localization of China’s new energy vehicle industry chain but also established an educational system for talent development. In May 2021, Shanghai University of Electric Power signed a cooperation agreement with Tesla to develop the “Modern Industry College”. Tesla will prioritize hiring professional talents trained by the university. By 2025, the university aims to establish a nationally influential and exemplary demonstration zone for integrating industry and education, cultivating over 100,000 skilled industrial workers with primary or higher vocational skill levels and professional titles.
Tesla’s entry sparked the rapid growth of a large number of Chinese new energy electric vehicle companies such as Xiaopeng Motors, NIO, BYD, followed by tech giants like Tencent, Baidu, Huawei, Alibaba, and Xiaomi venturing into the automotive industry.
On the mainland’s network, it is described as “introducing Tesla as just the start of activating China’s manufacturing industry chain”, with China’s “Future Auto Daily” publishing a long article in 2022 titled “Supply chain and Tesla, who picked whose pocket?” likening Tesla to Apple’s iPhone, praising the significant contributions of Chinese companies on the Tesla industry chain.
TrendForce statistical data shows that in 2023, Tesla ranked first in the global electric vehicle (BEV) market share, leading second-placed BYD by only 2.8 percentage points (17.1% vs. 14.3%). Additionally, in the fourth quarter of 2023, BYD’s sales surpassed Tesla, with analysts projecting BYD’s electric vehicle sales to surpass Tesla in 2024.
In March this year, Xiaomi, amidst controversy for copying Porsche’s design, launched the first “Xiaomi SU7” electric vehicle, which sparked discussion. In a recent live broadcast program, Xiaomi’s automotive CEO Lei Jun admitted that when the value for the “Xiaomi SU7” wasn’t high enough, he acknowledged that almost all pure electric car models, except Tesla, were operating at a loss in the industry. Some models even faced losses exceeding tens of thousands of RMB, with Xiaomi SU7 being towards the lower end of the loss spectrum. However, Xiaomi has enough cash reserves to withstand five years of competitive market pressure, indicating that price wars won’t sway Xiaomi’s automotive trajectory.
It can be said that Chinese electric vehicle companies such as BYD rely on subsidies from the government, not making profits, engaging in a “long-distance price war” against foreign companies like Tesla. Lei Jun states they have funding support for five years, possibly inadvertently revealing the deadline given by the Chinese government to these Chinese electric vehicle companies.
Since Tesla’s disclosed interest in setting up a plant in China early on, the Chinese government unusually granted Tesla multiple exceptions along the way.
In January 2014, during an interview with Chinese media, Musk revealed Tesla’s plan to build a production plant in China; in January 2016, Musk mentioned they were seeking a local partner for production in China and had held a series of high-level talks with the Chinese government.
In their lengthy negotiations with the Chinese government, Musk had shown interest in the Indian market as a backup plan. The vast population and strong consumer purchasing power in India made Musk express his intentions to enter the Indian market in 2017. However, both sides were entangled over market access thresholds and factory construction issues, resulting in Tesla ultimately not entering the Indian market.
The Chinese “Future Auto Daily” once disclosed that the biggest obstacle hindering Tesla from establishing a factory in China was the equity ratio in joint ventures. Following the automobile industry policies at the time, the Chinese equity ratio in Sino-foreign joint production enterprises could not be lower than 50%.
Everything changed in April 2018. During that year’s Boao Forum for Asia, Chinese leader Xi Jinping announced new significant measures in expanding openness, including relaxing foreign equity ratio restrictions, particularly in the automotive industry, and considerable reductions in car import tariffs.
This fast-tracked Tesla’s factory construction. In May of the same year, Tesla (Shanghai) Co., Ltd. obtained its business license, marking the first time a foreign company established a subsidiary in China following the relaxation of foreign equity restrictions in the automotive industry. Typically, standalone foreign firms like Tesla would be subject to a 25% tariff on electric vehicles in China. However, in 2017, the Chinese government promised to exempt Tesla electric vehicles from the 25% tariff. The question arises—why did China give Tesla such preferential treatment? Former Chairman of the Shanghai American Chamber of Commerce, Kenneth Jarrett, analyzed, “China was looking for headlines to show that American companies still wanted to be here” at that time. Simultaneously, “Tesla also realized they could be more assertive in negotiations and secure what they wanted.”
As US-China relations undergo another round of escalated tensions beyond the onset of the trade war in 2018, during the two days prior to Musk’s Beijing visit, US Secretary of State Antony Blinken visited Beijing, labeling China as a primary supporter of Russia’s military industry and cautioning that if Beijing continues providing arms and related technology to Russia, Washington will take punitive actions.
Amid these tense US-China relations, China invited Musk to visit Beijing, once again granting Tesla various favorable treatments. These include the long-awaited landing of Tesla’s Full Self-Driving (FSD) system in China.
Tang Jingyuan analyzed that some of Xi Jinping’s policies today embody a wartime strategic purpose. He stated, “Xi Jinping’s welcoming of foreign companies like Tesla is not about market economy or genuine high-quality open reforms; the real intention is to obtain financial infusions and advanced technology while creating a unilateral dependency on foreign companies and related countries, serving as a critical bargaining chip for Xi in potential conflicts with the West, be it cold or hot wars.”