Why does Elon Musk need China?

When Elon Musk first established the Tesla factory in China, he seemed to have the upper hand.

He gained access to top leaders and achieved policy changes that benefited Tesla.

It also accustomed workers to long hours and fewer protections after clashing with U.S. regulators over working conditions at the California plant.

The Shanghai factory helped Tesla become the most valuable car company in the world, and Musk was one ultra rich.

But Tesla is now in trouble.

Musk helped create his competition:

THE Chinese manufacturers of electric vehicles that are gaining market share and becoming a safety issue for the United States and Europe.

Tesla has benefited from a Chinese policy that has helped shape the economy

In California, where Tesla launched its first car in 2008, the company has benefited from an emissions mandate that allows it to sell credits (worth billions of dollars) to automakers that fail to meet pollution goals .

When Musk turned to China, his lobbyists encouraged that country’s leaders to adopt a similar policy.

The emails and other documents you obtained The New York Times show they worked with California environmentalists trying to clean up China’s air.

Beijing adopted the policy, also promoted by groups outside Tesla, in 2017.

After Tesla opened its factory in Shanghai in 2020, the company earned hundreds of millions of dollars in claims through politics, according to market analytics firm CRU Group. .

Musk’s fortune is linked to the Tesla factory in Shanghai

The Shanghai factory replaced Tesla’s factory in Fremont, California the largest and most productiveand accounts for more than half of the company’s global deliveries and the majority of its profits.

As the plant took shape in just under a year, Musk worked closely with a city official who is now China’s prime minister, Li Qiang.

Under Li’s direction, state banks offered Tesla low-interest loans, a deal so generous that one senior auto official recalled one minister objecting.

China also changed ownership rules so Tesla could establish itself without a local partner, a first for a foreign automaker in China.

Musk saves on manufacturing and labor costs in Shanghai and couldn’t get rid of it easily if he ever wanted to.

Since the billionaire’s wealth is tied up in Tesla shares, his personal fortune now depends on what happens in China.

Tesla’s growth in China has connected Musk to Beijing

Musk’s dependence on the Shanghai factory could give Beijing some leverage over him.

This is troubling because a second Musk company, SpaceX, has sensitive contracts with the Pentagon and controls much of the world’s satellite internet through its Starlink network.

Musk said his companies should not be merged.

But he has also praised Chinese leaders and taken China’s side in geopolitical disputes, even as he criticizes U.S. politicians.

In an online conversation with two members of Congress in July, he described himself as “kind of pro-China”.

China offered a way out of labor problems

Musk, who has implied that American workers are lazy, has demanded intensity at Tesla’s Fremont factory, sometimes even sleeping on the factory floor himself.

In Shanghai, Musk may escape American regulators and worker organizers.

The Times spoke to Chinese workers who described being asked to work six consecutive rounds 12 hours during the coronavirus city shutdown in 2022.

Some slept on the factory floor, as Musk had done in Fremont. They could choose not to work, but in exchange for a pay cut, they said.

When a worker was crushed to death by machinery last year, a government report citing safety gaps was removed online.

Tesla has boosted the development of electric vehicles in China

Chinese leaders wanted a Tesla plant to revive the electric vehicle sector.

And this is exactly what happened.

In Shanghai, Tesla shifted to using locally made batteries and components and, in some cases, helped suppliers develop technologies that they then sold to Chinese electric vehicle makers.

Tesla has also trained a generation of talent.

Now Europe and the United States are trying to catch up. French Economy Minister Bruno Le Maire says China is between five and seven years ahead of Europe.

And Tesla itself is increasingly vulnerable.

It was overtaken in global sales by its Chinese rival BYD late last year.

Without trade barriers, Musk warned in January, BYD and others “will virtually demolish most other automakers in the world.”

c.2024 The New York Times Company