SUMMARY

China used Musk’s trip to amplify their message that they are open to American businesses, despite rising tensions between China and the U.S.

Elon Musk’s very short trip to Beijing for a meeting with China’s Premier Li Qiangshowed how the power equation is changing between the Chinese governmentand Tesla.Tesla’s chief executive (Elon Musk) left the republic with assurances that the carmaker will be able to bring its self-driving technology on the road. Musk’s hopes for rekindling Tesla’s growth in the world’s biggest electric-vehicle market rests on the software. Currently it is being outmaneuvered by homegrown rivals.

China, for now, used Musk’s trip to amplify its message that it is open to American businesses, despite mounting tensions with the U.S. State media quoted Musk handing a stamp of approval to China’s electric vehicle market, saying his observations dispelled U.S. concerns about overcapacity. Beijing also sought to offer clarification that foreign firms can thrive under its tight regulatory controls.

Musk emerged with a victory, analysts said, but the meetings underlined that while China remains critical to Tesla, Beijing now needs Tesla far less to spice up its autonomous-driving and EV industry. Tesla has seen China sales drop as its rivals there flood the market with numerous new models, contributing to the US carmaker’s first year-over-year quarterly car sales drop since 2020 and a sharp profit drop.

“China needed Tesla to open the EV market, I’m not sure China needs Tesla to open the market for autonomous vehicles,” said a Shanghai-based consultant for Automobility, Bill Russo. Some Chinese companies have already become capable of developing sophisticated driving technology on their own, he said.

Chinese officials welcomed Musk wholeheartedly when he went to China in the early years of the relationship. They provided land, low-interest loans and tax incentives for Tesla to establish a factory in Shanghai and its approval improved consumers’ perception of Tesla in the world’s biggest auto market.

The deal proved to be good for both sides. Tesla helped kindle China’s EV industry, which is now the envy of the world. Shanghai proved to be Tesla’s most productive and cost-efficient factory, helping it to lower the prices of its cars. Sales of Tesla’s made-in-China Model Y and Model 3 climbed, making the nation its second-biggest market, as well as an export hub.

But Tesla inspired Chinese carmakers have become fierce rivals, eating up into its market share there and increasingly challenging it overseas. Hope of many analysts that Tesla would expand its Shanghai factory to manufacture a more affordable EV have dimmed. Instead, a plot of land next to its initial plant is being used by Tesla to manufacture its energy-storage Megapacks.