by Wallace Wyss –
There is an old Chinese saying “He who rides the tiger sometimes ends up inside.”
In having his biggest factory for Teslas in China, Musk is certainly riding the tiger. He has managed to build a best selling marque in China and sells the cars he makes there in other countries including Canada. The downside is by having Chinese workers, they found out everything they need to know to build an EV from working there.
So China now has a bunch of EV start-ups which, by the law of the jungle, could someday eat the man who showed them the way. The prospect of moving to India beckons but the record of outside companies in India is not smooth and untroubled as Musk’s Chinese tenure has been.
China car production has boomed. The Chinese auto industry has too many players though. Not the big Three, or Big Four. Try the Big 650. If they melded them down to the Big 10, there would be one with enough cash to rival Tesla.
And don’t hold on to some idea that Chinese designs won’t be palatable in the US or Europe. I just saw the new Auto & Design magazine from Italy at Barnes & Noble–most of the vehicles were competitive with the best European or US designs, and many Chinese automakers have European designers in charge of designing, like Volvo who has European designers working on the EX0, an SUV to be built in China (because it’s built in China it’s not eligible for any US tax credit, and subject to a 27.5% tariff).
There’s a dark cloud on the horizon, though. Anything to do with China is political now. Methinks the relationship between China and the US is one that politically could endanger Musk’s growth plans. Say if China invaded Taiwan. The US would punish them by not just a tariff, but by forbidding Chinese EVs to being sold in the US. The US recently forbid certain Chinese electronic parts from being sold in the US as the Chinese military has ways to access products using those parts. The pitch is you are helping the enemy, being like the US buying weapons from Germany as Germany invaded France in WWII.
If Musk sells his Chinese-made cars in other countries Washington might even pressure those other countries to cut Chinese car imports. Here is where building alternative plants in other countries could save him. I think he needs two more plants abroad to equal what his one Chinese plant produces. But if he has to pay 20% more wages to the workers in those new plants, it’s not so enticing. It might happen, though, if the new host countries give him free land and other enticements. He’s always playing one country off against another until he gets a sweet deal.
Whatever you say about him, Musk showed Detroit how to make cars in a foreign country profitably. But I think he’s worn out his welcome in China and best be making new plans to decamp to other fields for his overseas factories.
Let us know what you think in the Comments.
THE AUTHOR: Wallace Wyss analyzes the auto industry as co-host of Autotalk a weekly radio show broadcast from KUCR FM Riverside.
Tiger photos from Pexels.
Tiger talk , well done. Chinese Clone strategy works–for them. Have.been doing macro economics at ” The Highest Levels” a long time. More Frightening than usual. .
BMW, MB, GM, Ford have surrended.
You are right that some of the Chinese alternatives even look better than a refrigerator. Many not so good about fires or safety ,quality or spare parts. Drivers are pleanty and expendable there. Musk already got on the local gvt. S List and sales and registration of Teslas stopped. Phony local law suits and physical attacks on Teslas at Chinese national car show.
Seems OK now. Musk must have rolled over.
Well that Chinese Tesla and battery factory are big.
The writings on the wall ! Better make sure your kids learn Chinese.
In the town I grew up in they have always provided the residents with driveway service for household refuse. Going way back, they have always used gas engine jitneys with hydraulic tippers. About two years ago they decided to try electric jitneys and bought six units. A few weeks ago they had four units charging overnight in one bay of the DPW. One exploded at 3AM and destroyed all four units and almost burned down the Public Works building. This technology has a long way to go before it will be safe. I would never charge one in my garage at home!