What a change 11, 000 km make. Elon Musk may be considering this as Tesla’s stock prices boom as a result of the billionaire’s authority to depart from Austin, Texas, for Beijing.
Sure, Musk claims to have overcome some legal difficulties in order to introduce his driver support system in the world’s largest vehicle market. According to reports in the media, Musk and Baidu Inc. agreed to work together on tracking and mapping software and fulfilled some requirements for data security. That, after he met with “old friend”  , Li Qiang, China’s premier.
However, Tesla’s two immobile things are forgotten by investors who give Musk’s invincible force the benefit of the doubt. One, the influx of affordable, new Chinese electric vehicles ( EVs ) that Musk might not be able to offer. Two, the threat of another Donald Trump presidency.
The first difficulty is related to one of the causes of Tesla’s 22 % decline this year. The prints of China’s growing danger are all over why,” since soon 2023, sentiment on Tesla has deteriorated”, says John Murphy, an analyst at Bank of America.
According to JPMorgan researcher Ryan Brinkman,” the broad layoffs” Tesla announced in the middle of April, which “amounted to a reduction in manned production capacity, may presently left no doubt that the decline in deliveries has been a function of lower demand and not source.”
Never mind terrible reports of the fatal implementation of Musk’s lengthy- awaited , Cybertruck, with its” trapped wheel” fault going viral on social media. Even after the “nightmarish cost breaks” Musk announced in middle- April,” the whole amount” of the problems they represent “are n’t being thoroughly appreciated by Mr Market”, says Gordon Johnson, scientist at GLJ Research. He refers to Tesla as” the best short-play in the stock market right now.”
Thus the necessity of Musk’s wonder China explore. As , Michael , Dunne, CEO of automobile industry consulting ZoZoGo, says,” Elon may use a small prefer right now. Is China in the disposition”?
Only time will tell. As Johnson tweeted on April 30:” The issue$ TSLA needs to answer is simple: Did you get a passport, like BYD/others beneath, to give level 3 autonomous vehicles in China? All assumes that they did. We at , @GLJ_Research are of the firm belief they DID NOT ( as everyone is assuming ). So… , @elonmusk/@Tesla, may you choose clear this up for people”?
For now, though, Musk conveying a significant Chinese acceptance is a “home work” for Tesla, says Dan Ives, scientist at funding company Wedbush, which maintained its “outperform” ranking on the stock.
As required by Beijing’s regulatory bodies, Tesla has documented all data that its Chinese fleet has collected in Shanghai since 2021. If Musk is able to obtain Beijing’s consent to transfer data collected in China abroad, it would be crucial for the global expansion of training for its autonomous technology.
In a note to clients, Morgan Stanley argues the symbolism of Musk’s sudden China drive- by speaks volumes, signaling Tesla’s determination to be part of a broader mainland ecosystem.  ,
The bank comes to the conclusion that” Musk winning blessing from the People’s Republic of China for full- self-driving roll-out in the country seems to address embedded concerns about Tesla’s China profit.”
Here, Musk’s personal bond with Li is a big plus. It was Li, back in his days as Shanghai party boss, who lobbied Musk to open a Tesla “gigafactory” in the city. The facility, which opened in April 2022, was Tesla’s first outside the US, giving President Xi Jinping’s Communist Party some bragging rights.
Musk is now making an implication about expanding his production in China. In 2022, Tesla contributed roughly one- quarter of Shanghai’s overall total automotive production.
As Musk looks to expand his autonomous driving fleet and sales to Chinese consumers, local governments should look for closer ties with Tesla to win some of those jobs.
It’s just what Li’s image makers might’ve hoped for as Tesla looks to , “aggressively focus on building out its China footprint”, Ives notes. Even though China has its own promising EV companies, including BYD Co. Musk understands that Xi’s nation has become” the golden goose EV market”, Ives notes.
As such, Tesla’s mainland plant is now the “heart and lungs” of Musk ‘s , global production.
Yet Musk’s problem is no longer just the , Warren Buffett- backed BYD. It’s an entire fleet of EV upstarts beginning to clog the roads for business in Asia’s biggest economy. The ongoing Beijing International Automotive Exhibition, dubbed Auto China 2024, demonstrates what Musk is up against, as Asia Times contributor Scott Foster detailed this week.
The event, Foster argues, is showcasing how many mainland rivals are catching up with EV pioneer Tesla and, worse, “increasingly making it look like an ordinary car company”. And Tesla is not even present at the May 5 event that continues. ” Meanwhile”, as , Foster writes,” Tesla has dropped to third place in the new- energy vehicle retail sales ranking in China”.
China Passenger Car Association data shows BYD sold 586, 000 units in the first quarter of 2024, while Geely sold 137, 000 to Tesla’s 132, 000 and Changan’s 126, 000. That is exactly one year after the quarter in which BYD surpassed Tesla in battery-powered electric vehicles.
Garrett Nelson, an equity analyst at CFRA Research, claims that Tesla’s introduction of new low-cost vehicles to the market over the upcoming years would serve as” the catalyst the stock needs.”
The catch, of course, is that mainland automakers are ahead of Tesla in that respect. Mosque’s ambitions clash with China’s desire to dominate the EV boom, especially as US consumers become less interested in the sector and Japanese manufacturers like Toyota cling to hybrids.
Tesla is very important to China, but Beijing’s top priority is increased domestic competition and exporting goods abroad. As mainland prices continue to drop, can Musk’s one- time EV juggernaut compete?
An equally unanswerable question: what happens if Trump wins the , November 5 , US election and imposes his , 60 % taxes , on all Chinese goods? Trump is also putting together a list of potential 100 % tariffs on some auto imports.
Sure, Tesla makes loads of cars in the US. But Musk might suddenly face two dilemmas. One, Trump forcing Tesla to pick a side: produce vehicles in the US or China. The chances of the” America first” president allowing Musk to play on both sides are essentially nonexistent.
At the same time, Morgan Stanley warns, there’s also the national security risks stemming from Musk’s China dealings. Making more Teslas in China might put the contracts between SpaceX and various US government agencies in danger.
In a second Joe Biden term, these issues might also arise. The more US Congress members might consider excluding Musk’s interests the closer they are to China, especially in terms of data sharing roles.
The US president has taken drastic measures to restrict access to essential US technology on the continent in recent weeks. Additionally, he has added new protectionist tariffs to imports of Chinese steel and aluminum.
According to US National Economic Council Director Lael Brainard,” China’s policy-driven overcapacity poses a serious risk to the future of the American steel and aluminum industry.” ” China cannot export its way to recovery. China is simply too large to follow its own laws.
Trade tensions are surging elsewhere, too. The president of the European Commission, Ursula von der Leyen, warns that “global markets are now flooded with cheaper Chinese electric cars and their price is artificially low thanks to massive state subsidies.
Musk’s recent pleas for new trade restrictions to stop Chinese electric vehicles from “demolish” the world’s competition could be another potential hiccup.
Tesla shareholders were informed earlier this year that Chinese automakers are the “most competitive” and” will have significant success outside of China, depending on what kind of tariffs or trade barriers are established.”
Musk added that “most other car companies in the world will almost completely collapse if there are no trade barriers established.” They’re extremely good”.
And now, fully aware of the complicated web that Musk will have to navigate while remaining in Trump’s and Xi’s good graces. Is it even possible, given that the two biggest economies are trying to decouple their economies? The globe’s second- richest man is about to find out.
Follow William Pesek on X at @WilliamPesek