In a sudden move at the end of April, Tesla’s boss Elon Musk visited China and immediately met with Chinese Premier Li Keqiang. Subsequently, the China Association of Automobile Manufacturers issued a notice that Tesla’s vehicles produced in Shanghai comply with safety regulations. Foreign reports also indicated that Tesla has obtained approval from Beijing to launch its Full Self-Driving (FSD) technology in China. Previously, the Chinese authorities had been putting pressure on Tesla, but now they have unexpectedly made concessions. The purpose behind this shift is likely to allow Tesla to help China enhance its capabilities in areas like smart connectivity and assist in steering the Chinese economy out of its predicament. However, the outcome of this deal between Beijing and Musk, as well as the final result, could potentially see short-term gains for the Chinese Communist Party but lead to long-term losses.
Regarding Tesla’s Full Self-Driving (FSD) technology receiving approval from the Chinese authorities, many are analyzing the motives behind what the Chinese government is truly aiming for in this move. Whether China is trapping Musk, or the Chinese officials are setting a trap for themselves, warrant a deeper analysis. From political, market, and technological perspectives, both the Chinese authorities and Musk should have their own gains and losses at the moment, resulting in a somewhat favorable outcome for both parties. However, the notion that China has trapped Musk might be wishful thinking because ultimately, it’s likely that China, in its blind pursuit of new qualitative productivity, has been completely hoodwinked by Musk!
Looking at the political reasons, China has announced the convening of its 20th Third Plenum in July, a meeting on economic policies that has been postponed for three quarters and urgently needs to take place. The question arises whether the Third Plenum will present a miraculous cure for the economy. It’s highly unlikely, as if China had such a cure, they would have implemented it already. The delay in the Third Plenum’s convening is due to the fact that China’s economy is beyond saving, leading to the desperation to boost some economic drive for the sake of appearances. Tesla’s electric vehicles are the epitome of the “new qualitative productivity”, and this serves the purpose for the Chinese authorities to have something substantial to showcase during the Third Plenum, rather than being empty-handed.
Looking at the market perspective, China’s decision to support the new energy vehicle industry dates back to 2009, with subsidies beginning in 2010 and peaking in 2012. The subsidies for high-endurance pure electric cars (250 kilometers) amounted to 60,000 RMB, while low-endurance pure electric cars (80 kilometers) received only 35,000 RMB. With central and local governments offering subsidies ranging from four to five thousand to one to two hundred thousand, China’s subsidies for new energy vehicles totaled a staggering $57 billion from 2016 to 2022, prompting international backlash. Facing investigations into subsidy practices from the EU and the forthcoming tariff barriers, Chinese electric vehicles are at risk, while U.S. legislators caution against China bypassing Mexico by exporting cars to the U.S. As the reality of losing European and American markets looms, China is pinning its hopes on imparting autonomous driving technology to its electric vehicles to enhance competitiveness and potentially dominate markets in Africa, Latin America, and Southeast Asia. Tesla’s Vice President responsible for China’s external relations, Tao Tao, mentioned in the Communist Party’s People’s Daily that autonomous driving technology will drive new growth in the EV industry.
From a safety and consumer perspective, Tesla’s vehicles are affordable, flexible in operations, powerful in performance, and proven to be safe and reliable even after severe collisions without the risk of battery fires, unlike Chinese domestic electric vehicles dubbed as “moving crematoriums”. Tesla, established in the US in 2003, entered the market in 2008 and has not experienced incidents where drivers and passengers were burned alive inside vehicles over the past 16 years. Had such incidents occurred, the government would have promptly recalled all Teslas, addressing any battery-related issues to continue sales in the US. Unfortunately, Chinese domestic electric vehicles frequently catching fire and exploding have led to numerous fatalities, yet the Chinese authorities continue to allow such sales to satisfy GDP requirements, jeopardizing lives for economic growth needs.
From a technological standpoint, Tesla has had to collaborate with Baidu to deploy mapping and navigation systems in China. According to the agreement, Baidu will permit Tesla to utilize its lane-level navigation system. While Tesla’s vehicles and AI systems can be trained and accumulate data in China, Musk aims to have Chinese customer data stored in China exported to the US for training, a request still pending approval by Chinese authorities. The discrepancies in road systems, traffic conditions, bike and pedestrian flow between China and the US limit the potential for substantial data outflow due to China’s restrictions, potentially symbolic in nature.
Concerns loom over Musk paying a high price for implementing FSD in China, as core technology might be stolen by China. Domestic Chinese new energy vehicle manufacturers have swiftly risen, benefiting from Tesla’s open patent policy. BYD is said to have employed over a hundred Tesla patents. Among the patents Tesla has opened up, more than 200 are for technological inventions covering batteries, motors, power electronics, vehicle manufacturing, human-machine interaction, and charging infrastructure. The pilfering, imitation, and partial copying of Musk’s FSD technology are inevitable and are likely to transpire. Musk’s audacity in delving into this realm should come with a certain level of safeguarding capability to maintain a three to five-year lead. Beyond that period, Tesla is poised to maintain heightened technological superiority, stay ahead of Chinese competitors, and uphold its market dominance. From the perspective of the author, Musk’s next step might involve integrating Tesla vehicles directly with the Starlink system and Starlink phones to establish a globally-connected, real-time, automated transportation service system accessible to consumers worldwide!
The global electric vehicle industry has lost its initial momentum in rapid growth, particularly in developed countries. While global electric vehicle sales have surged post-2020, especially in China, growth rates are now decelerating in Norway, the UK, and the EU. Electric vehicles hold a 20% market share in new car sales in the EU and the UK, while the US maintains around 10%. As part of Musk’s overall strategy, he is willing to share technology to enable massive production by Chinese electric vehicle manufacturers, allowing China to popularize electric vehicles through the Chinese government. The localization rate of parts at Tesla’s Shanghai Gigafactory has surpassed 95%, with over 400 local Chinese Tier-1 suppliers contracted by Tesla, over 60 of which are integrated into Tesla’s global supply chain. Musk can leverage Chinese electric vehicle manufacture to advance global electric vehicle progress but if China pushes too aggressively and causes overcapacity, it would be China’s issue, not Musk’s. Musk only needs to maintain Tesla’s position in the Chinese market as a high-end, reliable, quality brand to achieve his objectives. As Chinese electric vehicle companies engage in cutthroat competition where many will face bankruptcy and layoffs, it will be the Chinese government’s economic failure and political nightmare, not Musk’s concern.
Therefore, Musk, with his extraordinary intelligence spanning courage, vision, and acumen, surpasses the obscured aims and greed of the Chinese giants and bureaucratic officials. As the world’s richest individual, he is unlikely to be bought off by the Chinese government. What concerns the Chinese authorities is power and wealth on earth among people, while Musk, as an extraordinary individual, dreams of reaching for the “skies” and beyond, in Mars, as he aims to transform humanity into a multi-planetary species. The dilemma that Tesla may face is a two-fold scenario: the Chinese government may restrict data export, while the US government may prohibit Tesla from bringing high-end chips used for training artificial intelligence to China.
Musk ventures into China boldly, and on his first entrepreneurial journey at Tesla’s Shanghai inauguration in 2019, he managed to help propel the Chinese electric vehicle industry forward significantly. However, this move also inadvertently caused China’s electric vehicle industry to face issues of oversupply, challenges in exporting products abroad, and the negative repercussions of numerous companies merging operations. When Musk and the then-Shanghai Mayor, Ying Yong, jointly presided over the groundbreaking ceremony of Tesla’s Shanghai factory on January 7, 2019, Musk’s intentions were to bypass the US-China trade war tactics and directly sell his “green” energy electric vehicles in China. Fast forward five years, the times have changed, and worldly affairs have become even more convoluted.
In his second upgrade of Tesla in Shanghai five years later, introducing the world’s most advanced FSD autonomous driving technology, Tesla pulls further ahead of Shanghai-made vehicles, setting the stage where Chinese companies may catch up with Tesla in a few years. Musk’s vehicles might integrate with Starlink again, birthing new human transportation modes. Therefore, Musk’s recent visit to Beijing seems like he has fallen into China’s trap, but from the author’s perspective, it appears more like he has outsmarted China, leveraging China’s rushed attempts to escape economic downturns by propelling into the fully automated electric vehicle market. Given the current international landscape, it’s doubtful that China’s vehicles can enter European and American markets; rather, they face hesitance in Asia and Latin America and may find a footing solely in Africa. China’s excessive investment in electric vehicles, coupled with Xi Jinping’s failed records in areas like chips, Xiong’an, and the Belt and Road Initiative, is likely to lead to China’s overall long-term losses outweighing the short-term benefits gained from importing technology from Tesla.
In summary, the remarkably astute Musk, with unparalleled courage, vision, and intellect, stands above China’s clout and greedy bureaucracy. As an international tycoon, he cannot be swayed by China’s earthly powers and wealth; his aspirations lie beyond this world, aiming for the skies, for Mars, striving to transform humanity into a multi-planetary civilization. The next challenge for Tesla may involve navigating China’s restrictions on data export while confronting potential US limitations on exporting high-end chips for AI training to China. Musk, a visionary and pioneer, blazes a trail through uncharted territories, steering Tesla into a future where innovation meets societal needs, birthing a revolutionary era of autonomous electric vehicles worldwide.