Why Musk chose to go to China and not India

Why Musk chose to go to China and not India

Tesla CEO Elon Musk, on Sunday, traveled to China on an unexpected journey. Ironically, a week before, he had cancelled a much-hyped trip to India citing “very heavy Tesla obligations”.

Musk was scheduled to meet Prime Minister Narendra Modi and senior officials during his India visit. The cancellation came despite Musk confirming his India visit in advance on April 10. The Tesla CEO was expected to announce a $2-3 billion EV factory for India during the visit along with some announcements related to Starlink.

Musk’s reliance on ChinaElon Musk’s business activities in China with Tesla have had a major influence on the electric vehicle (EV) industry, both within the country and worldwide. At first, Elon Musk appeared to have a special advantage when he started operating in the Chinese market, obtaining connections with key figures and affecting policy adjustments that benefited Tesla.

When Elon Musk was setting up Tesla’s operations in China, he received significant advantages like policy modifications and the ability to obtain loans at low interest rates. These benefits played a vital role in establishing the Shanghai factory without the need for a domestic collaborator, which is uncommon for international firms in China.

Tesla’s achievements in China have led to more competition and examination. Elon Musk’s actions unintentionally supported rivals in the Chinese electric vehicle sector, creating difficulties for Tesla in a market it played a role in revitalizing. Depending heavily on the Chinese market for a large part of Tesla’s manufacturing and earnings, Elon Musk’s supportive position towards China is essential for strategy but also a possible weakness.

Word on the streetAccording to a New York Times report, “Musk’s fortune is tied to Tesla’s Shanghai factory. The Shanghai factory has replaced Tesla’s plant in Fremont, California, as its largest and most productive, accounting for over half of the company’s global deliveries and the bulk of its profits.”

In an online conversation with two members of Congress in July, he referred to himself as “kind of pro-China,” according to the NYT report.

“Musk’s response to the pressure has been to become a high-profile cheerleader of China’s ruling Communist Party, in sharp contrast to his renegade persona in the US, where he has clashed with the Securities and Exchange Commission and mocked President Biden in tweets, once calling him a labor union sock puppet,” a Wall Street Journal report said.

According to the WSJ report, in July, Musk expressed admiration for China’s economic achievements on Twitter, saying, “The economic prosperity that China has achieved is truly amazing, especially in infrastructure!”

The success story of Tesla in China has both positive and negative aspects. The Shanghai factory plays a crucial role, contributing to more than half of Tesla’s worldwide deliveries. However, it has also exposed Musk to potential Chinese influence.

He has spoken positively about Chinese leaders and backed China on sensitive topics such as Taiwan, potentially to uphold good relations and safeguard Tesla’s position in the Chinese market.

This situation is especially worrying because another business owned by Musk, SpaceX, manages important contracts related to the security of the United States.

Musk’s ties to China have long been scrutinized in Washington, with President Joe Biden suggesting in November 2022 that his foreign connections were “worthy of scrutiny.”

Musk provides a contrast to the tough rhetoric from US officials in China, especially during a recent visit by Secretary of State Antony Blinken.

The larger perspectiveElon Musk’s increasing connections with China demonstrate a common pattern seen in major American technology companies utilizing China’s extensive market and manufacturing capabilities, but subsequently becoming more reliant on Chinese regulations and economic changes.

This reliance is especially evident for Tesla. Tesla sees the Chinese market as a significant factor for growth and a possible threat because of increasing geopolitical tensions.

Tesla’s existence in China has encouraged new ideas and rivalry in the Chinese electric vehicle market. Tesla’s shift to using locally made batteries and parts has helped local suppliers develop technologies now used by Chinese EV makers, inadvertently aiding competitors like BYD-“Build Your Dreams’.

BYD surpassed Tesla to become the world’s leading electric vehicle (EV) seller in the last quarter of the previous year. Nevertheless, Tesla reclaimed its position as the leading seller of electric vehicles globally in the first quarter of this year, while BYD still holds a strong position in the Chinese market.

These manufacturers from China are currently competing with Tesla on a global scale.

However, Tesla relies heavily on the Chinese market for a large portion of its production and revenue, which puts Musk in a risky situation due to the changing dynamics of US-China relations.

The future of Tesla in China is expected to have a significant impact on Musk’s businesses, affecting not just the automotive and tech industries but also potentially influencing US security interests.

“China’s game isn’t to let Tesla win,” Bill Russo, founder of Automobility, a Shanghai-based consulting firm, told WSJ.

For more news like this visit The Economic Times.