Tesla boss Musk made a surprise trip to China. He has a lot to discuss on site, as the Chinese are pushing forward in the electric car market.
Tesla founder Elon Musk unexpectedly flew to China on his private plane on Sunday and met with China’s Prime Minister Li Qiang. The timing was probably not chosen by chance.
The most important automobile companies are currently presenting their new products to each other and potential customers at the Beijing Auto Show – including in the area of electric cars. A sensitive topic, because Musk and Tesla are in direct competition with Chinese start-ups, which are extensively supported by the Chinese government. But giving up the Chinese business without a fight is not an option. After all, it is the second largest sales market for electric cars.
Diplomatic praise
Therefore, diplomatic skills are required from both sides. Li called Tesla’s development in China a “successful example of China-US economic and trade cooperation,” state television CCTV reported. Musk, in turn, praised the “hard work” of his Chinese team in Shanghai, which makes the Tesla factory there the company’s best performing. Musk said they are also prepared to deepen cooperation with the Chinese side.
Before his meeting with Prime Minister Li, Musk met the head of the China Council for the Promotion of International Trade, Ren Hongbin, on Sunday, according to CCTV. He also discussed “the next steps in the collaboration” with him.
Musk’s sudden personal appearance in China underscores the importance he attaches to the country. For Tesla, the People’s Republic of China is not only the second most important sales market in the world. The company also has its largest factory in Shanghai. Musk postponed a planned meeting with Indian President Narendra Modi about a week ago. At that time, the 52-year-old explained his short-term cancellation citing scheduling reasons.
Musk’s visit is not necessarily an expression of strength. Because Tesla is currently suffering from a lull in the electric car market. In the first quarter, the company delivered surprisingly fewer vehicles worldwide than a year earlier, at almost 387,000 cars. In addition, Tesla had to recall 1.6 million electric cars in China in January in order to revise their software. The car manufacturer now wants to cut more than ten percent of its jobs worldwide.
Chinese start-ups are pursuing aggressive pricing policies
Chinese car manufacturers, on the other hand, are on the rise. Only the manufacturer BYD, which is still relatively unknown in this country, has already overtaken Volkswagen in terms of sales in China. There are several reasons for this.
A study published in mid-April by the Center of Automotive Management (CAM) showed that Chinese manufacturers of electric cars have recently caught up significantly in terms of technical innovations. However, Tesla continued to lead the innovation ranking. Chinese manufacturers have significantly more models in their range. BYD presents customers something new almost every quarter. The car manufacturers from China offer this range at aggressive prices. BYD also responded to the end of e-car promotion in China within a few days with new special offers. The company regularly competes with Tesla.
This is made possible by the high government subsidies in China, which were estimated to be up to 100 billion US dollars last year. The EU Commission is therefore currently investigating the extent to which prices on the European market are being kept artificially low – much to the annoyance of the Chinese authorities. The results of the investigation are still pending, but punitive tariffs could be imposed as a result.
This situation is also causing problems for German car manufacturers. In mid-April, Chancellor Olaf Scholz (SPD) traveled to China with a business delegation for three days. Fair trade practices and better market access for German companies in the People’s Republic were among his central concerns. However, his discussions did not produce any tangible results.
