What is Elon Musk doing in China?
Elon Musk has arrived in China: it is his first visit in three years, and will be dedicated to the expansion of Tesla's activities in the country. But the company does not lose sight of the US market
Elon Musk's private plane landed in Beijing today for his first visit to China in three years. The billionaire – he is CEO of Tesla, founder of SpaceX and owner of Twitter, among other things – is expected to meet with some high-profile Chinese government officials and visit the Tesla plant in Shanghai, according to Reuters and Bloomberg sources . More specifically, he may have a meeting with Prime Minister Li Qiang to discuss self-driving technologies the automaker would like to introduce to the country.
THE MODEL 3 REBUILD
Tesla is about to start test production in Shanghai of the new version of the Model 3, an electric sedan, which Musk believes is better suited to beat the competition on the Chinese market: it has been made slightly longer, sportier in appearance and more elegant in the interior.
THE IMPORTANCE OF SHANGHAI
As of 2022, the Shanghai factory was worth more than half of Tesla's global production and is currently capable of assembling 1.1 million cars a year. However, shipments from this plant dropped last April, a consequence of Chinese consumers turning to other models after local automakers also lowered their selling prices to capture more market share.
In short, Shanghai is a very important hub for Tesla, but the opposite is also true: last year the US company alone was worth almost a quarter of the value of the city's car production. For this reason, writes Bloomberg , the local authorities would like to strengthen relations with the company through agreements on autonomous driving and the use of robots.
TESLA'S PLANS FOR CHINA
Tesla said it plans to ramp production from its Shanghai plant to 450,000 vehicles a year, but it didn't provide any updates on the plan. However, he did let it be known that he had submitted to the local authorities the project for the expansion of the production capacity of powertrains to 1.7 million units a year. Furthermore, in April it announced that it will build a Megapack battery factory in Shanghai, which are not intended for cars but for energy storage, given their large size.
It is not certain that China will grant Tesla the authorization to expand the Shanghai plant. The economic planning authorities are busy rationalizing the electric car industry, which is crowded (there are more than a hundred manufacturers) and characterized by a situation of overproduction.
Elon Musk himself acknowledged, in a recent interview with CNBC , that "there are limits to our ability to expand into China", adding however that it is not "a question of demand".
THE POLITICAL TENSIONS BETWEEN AMERICA AND CHINA
With the Inflation Reduction Act, the United States has made it clear that it considers technologies for the energy transition – including batteries and electric vehicles – a sector of industrial and geopolitical competition with China. Equally clearly, however, Musk has made it clear that he does not want politics to condition his business in a market – the Chinese one, in fact – vast and promising.
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The billionaire, again in the interview with CNBC, had declared that the tensions between Washington and Beijing "should be a concern for everyone" due to the "growing belligerence". On the possibility of a Chinese invasion of Taiwan – the de facto independent country which Beijing considers part of its territory, even though it has never governed it -, he added that Tesla depends on a Taiwanese company, TSMC , for the microchips used in its vehicles.
THE BIG FACTORY IN MEXICO
China is Tesla's second largest market after the US. It is precisely by looking at the latter that the company has decided to build a large factory in Mexico (the whole of North America is also united by a free trade agreement), near the common border and the Austin headquarters.
The plant, which requires an investment of 5 billion dollars, will also be used to build a low-cost electric car.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/elon-musk-visita-cina-tesla/ on Tue, 30 May 2023 12:47:22 +0000.