Elon Musk was desperate for a quick win for Tesla. If that means flying to China a week after Indian Prime Minister Narendra Modi’s objections, so be it. The billionaire’s surprise visit to Beijing on Sunday to meet with government officials, including Premier Li Qiang, had immediate results. Tesla has received preliminary approval to roll out more advanced driver-assistance features in China, potentially boosting sales in its second most important market. Tesla’s China business could be a tailwind. Over the past 18 months, the company has repeatedly slashed prices to levels that could wipe out the country’s profits. The company’s shares rose as much as 14% before the start of regular trading on Monday, extending their post-earnings gains. The timing is also right for China.
The government is trying to convince foreign investors that the economy is still open despite government policies and the deflationary crisis. One of the losers in this mess is India, whose leader left Musk hanging just over a week ago, citing pressing issues for Tesla. Musk’s visit is “part of a larger picture of Beijing and local governments wanting to welcome more foreign investment,” said You Chuanman, director of the Shenzhen IIA Center for Regulation and Global Governance at the Chinese University of Hong Kong. . For the government, there’s also the added benefit of being seen as welcoming a big-name American company, which comes just days after President Joe Biden signed legislation forcing TikTok’s parent company to sell stock and ban it from app stores.
“This could be seen as a signal from the Chinese government how different the Chinese government is in accepting and welcoming foreign investors, while the US is the opposite,” Yu said. In a sense, Musk’s visit was a return to a safe haven. Tesla occupies a unique position among China’s most popular foreign companies. The company became the first international automaker to operate without a joint venture with a local manufacturer, an exception not granted to companies like Volkswagen AG and General Motors. Approval of the deal was brokered by Li, a former Shanghai Party chairman and currently China’s second-highest official. The red carpet treatment stands in contrast to Tesla’s longstanding conflict with India, whose trade policies and tax system are hostile to foreign automakers. In 2022, Musk said Tesla will not build production facilities in countries where it is not authorised to initially sell and service vehicles.
Relations between Tesla and India have shown signs of strengthening in recent months, with hopes rising that Tesla could invest around $2 billion in an electric car factory and a growing number of foreign countries looking to invest in local production. There is a possibility that import taxes on automobile manufacturers’ vehicles will be reduced. However, such an announcement was postponed. Musk cancelled his visit to India the day before he was scheduled to arrive, coinciding with the start of elections in the country. The country’s economic rise is at the centre of Modi’s campaign for a third term. The Beijing trip drew anger from some prominent China travellers. Musk’s postponement of his India visit may signal a change in strategy.
The CEO said last week that Tesla is accelerating the development of new models that will be built on the same production lines as the current lineup. Analysts speculate that this could mean the company will further delay construction of its Mexico factory and shut down all of its plants in India. Foreign automakers are struggling to find long-term success in the world’s most populous country. In 2022, one year after announcing production would cease, Ford Motor Co. announced it was considering alternatives for its manufacturing facilities in India. Toyota Motor Corporation said in 2020 that the company would not expand further due to high tariffs, but later announced plans to manufacture some electric vehicle parts domestically. Indian officials expect Mr. Musk to invest in the near future because of recent changes in electric vehicle policy, said a person familiar with the matter, who asked not to be identified because the discussions are private. Ultimately, Musk’s decision to visit China underscores the urgency of getting Tesla back on track.
Electric vehicles make up a small portion of India’s car market. In China, Tesla could regain some of the market share lost to local manufacturers led by BYD if approved for the system, which Tesla is touting as “fully autonomous.” . “China is a hub for everything Tesla wants to do,” said Tu Le, managing director of consulting firm Sino Auto Insights. “China is an essential market for car sales, and India is a happy market. ” he said. “Bottom line: Tesla needs continued success in the Chinese market to achieve its ambitious future goals.”
