How China Bought Tesla Lunch – Then Ate It  

By Shlomo Maital

     Consider Tesla, Elon Musk’s electric-car baby.  In 2010 the market value of its shares was a paltry $2.52 billion.   On November 6, 2021, in the midst of a pandemic, Tesla’s shares were worth a staggering $1.23 trillion, at their peak.  Today?  Tesla is worth less than half that:  $554 b. 

     Before we discuss the key role China has played in Tesla’s growth, here are a few more numbers.  Despite the sharp fall in value, Tesla is today worth more than the shares of Ford ($54 b.), GM ($51 b.), Toyota ($332 b.), and Build Your Dream ($81.6 b.).  taken together. 

      In the New York Times “The Daily” podcast, Tesla’s romance with China is told in detail.  Here is the story.

      In 2017 Tesla was in trouble.  Its factory in Fremont, CA., was struggling to produce cars.  Musk mounted a massive lobbying campaign, that got a key piece of legislation through the California legislature, under then-Gov. Jerry Brown.  Gas-guzzling car makers in California had to pay billions of dollars to Tesla’s “green” cars, based on environmental ‘credits’.  Tesla got billions, at a time when Tesla was desperately starved for cash.

         But that was just a Band Aid on a deep wound. 

          China to the rescue.  Musk negotiated a deal with China, to build a huge car plant in Shanghai.  (The then-mayor of Shanghai is now China’s #2, after Xi Jin Ping).  That plant is a paragon of Chinese efficiency.  Working 24/7, three shifts daily, it makes a million cars a year.  But better than that – Musk persuaded the Chinese government to pay Tesla ‘credits’ from conventional Chinese car makers, just like in California!  The State of California closed Tesla’s Fremont plant for two months during the pandemic. China? Tesla’s Shanghai plant closed for two weeks only, even when China locked down huge cities for long months.

          China saved Tesla. 

           Why?  Why would China rescue  Tesla?

            So, here are a few more numbers.  Bear with me.

             China produces yearly 6 million electric vehicles, soon to rise to 8.77 million.  Its EV’s are not quite as sleek and sophisticated as Tesla’s, but they have longer battery range and are much cheaper.  BYD has adopted a model pioneered by Henry Ford – vertical integration.  BYD produces lithium from mines,  electric batteries, basically everything their cars need.   BYD swallows every renminbi of profit generated by EV’s and so, can charge much less.

          Many of the workers and managers who cut their teeth on the Tesla Shanghai plant now work for Chinese EV makers.  In short – China used Tesla to shortcut its EV industry development, leaping ahead while using the California credit system to incentivize its gasoline-car makers to make the shift to EV’s. 

           And Tesla?  The mercuric Elon Musk dabbles in social media, space rockets, colonizing Mars — and supports free-market conservative politics, even though his business is alive because of Calfornia state govt. money. It appears that he has lost interest in Tesla.

           In my country, Israel, Chinese EV’s have surged.  Press reports note:  “Chinese automakers, particularly BYD and Geely, have made remarkable strides in Israel’s automotive market. BYD’s surge from fourth place in 2022 to the top in 2023 indicates the growing acceptance of Chinese brands.”

        Look for the same to happen elsewhere.