Tesla’s future in China in 2021 comes under fire from authorities, with mixed views on its future.
Tesla, the leading electric car manufacturer, has faced a cold snap in China this year, facing a sudden wave of criticism from Communist Party officials, the Party media and industry insiders, as well as being banned by the military and state-owned enterprises, in stark contrast to the warm reception it received three years ago. These developments reveal Xi’s plans to establish a Communist-led order in international affairs, including climate change, and Tesla appears to be a sacrificial lamb for Xi’s ambitions.
Perspective on the CCP’s New Energy Strategy Layout – Bending the Curve
On October 20, 2020, the State Council of the Communist Party of China (CPC) released the “Development Plan for New Energy Vehicle Industry (2021-2035)” (official link), publicly announcing its intention to “actively participate in the formulation of international rules and standards” in the field of new energy vehicles.
New energy vehicles (NEVs) currently consist mainly of plug-in hybrid electric vehicles (PHEVs), pure electric vehicles (BEVs) and a small number of hydrogen fuel cell vehicles, with pure electric vehicles being the mainstream.
In March of this year, the Chinese Communist Party officially issued the 14th Five-Year Plan, which lists new energy and new energy vehicles as strategic emerging industries and strengthens the development of civil-military integration in new energy and other fields.
A commentary by the Shanghai party media “Interface Official Finance” in March this year (link) reveals Xi’s hidden agenda behind the new energy, especially the “2060 carbon neutrality” target.
According to the article, Xi Jinping’s proposal to achieve carbon neutrality by 2060 last year provides an opportunity for the development of new energy industries such as clean energy; the CCP can achieve a bend in the “utilization” link of the “production-transmission-utilization” energy triangle. To put it simply, the development of new energy vehicles will drive the rapid development of the energy storage (new energy batteries) industry.
According to the article, the rise of China’s new energy vehicle industry cannot be achieved without massive government subsidies; for the CCP, “this is an arms race that is more important than semiconductors.
In fact, these CCP policies and plans are a follow-up to Xi Jinping’s years-long advocacy of “bending the curve to overtake the car.
Back in 2014, Xi stressed during a visit to Shanghai Automotive Group that “the development of new energy vehicles is a necessary path for China to move from a large automotive country to a strong automotive country.”
In April 2016, Xi instructed that “it is necessary to break through the core technology as a problem, and strive to achieve ‘overtaking’ in certain areas and aspects.”
During a visit to Jilin last July, Xi reiterated that “we should seize the opportunity to vigorously develop strategic emerging industries and achieve a bend in the road.”
In a December 28 report, the Voice of America quoted a number of experts as saying that the Chinese Communist Party is trying to catch up with traditional auto powers in Europe, the United States and Japan in electric vehicles by investing huge amounts of subsidies in China’s electric vehicle industry and allegedly stealing technology.
Last February, William Evanina, director of the U.S. Counterintelligence and Security Center (NCSC), publicly stated that stealing U.S. aircraft technology and electric vehicle technology are two of the priorities of the Chinese Communist Party’s espionage efforts.
Current affairs commentator Li Linyi analyzed, “Xi Jinping’s preaching of bending the road to overtake the car is itself tinged with speculation and implies a moral of unscrupulousness, otherwise why not say straight road to overtake the car.”
Besieging Tesla: Tesla’s ups and downs in China
Tesla’s transformation in China condenses and reflects the rise and fall of foreign companies under the rule of the Communist Party of China.
In May 2018, Tesla opened its mega-factory in Shanghai, not only becoming the first wholly foreign-owned car company in China, but also receiving many benefits from the Shanghai authorities, including free land and low-interest loans.
The first batch of Tesla Model 3s were produced at Tesla’s Shanghai superfactory in December 2019. sales of new energy vehicles in China fell continuously in the second half of 2019 as the Chinese Communist Party began to cut subsidies that year; and Tesla emerged to fill the market gap.
In the first 11 months of 2020, Tesla sold 114,000 China-made Model 3s, far outpacing its domestic competitors.
Tesla’s success in China has directly taken flight with China’s pure electric vehicle industry. Azera, Xiaopeng and RISO, which followed Tesla’s U.S. IPO, all saw record sales last year and all saw their share prices soar.
However, in mainland China today, the competition for electric cars is actually extremely fierce.
China’s self-published “Politics Hall” divides China’s EV industry into three central enterprises (FAW, Dongfeng and Changan), three state-owned enterprises (SAIC, GAC and BAIC), three German enterprises (BMW, Mercedes-Benz and Volkswagen) and Evergrande, which take the “right-wing route”; and “4 new forces (BYD, Azera, RISO, Xiaopeng), 2 private companies in transition (Geely, Great Wall) and 2 international giants (Tesla, Apple).
Among them, Tesla, which represents high-end intelligent pure electric vehicles, is facing more and more rival snipers.
Last November, SAIC announced a partnership with Shanghai Pudong New Area Government and Alibaba Group to create a high-end smart pure electric car brand “Jiji Auto”, and in December, Dongfeng Motor’s high-end electric car brand “Lantu” SUV started accepting pre-orders. Great Wall Motor also plans to create a new brand “Sharon” car.
In April, Guangzhou Automobile Group announced that it was working with Huawei to develop L4 level self-driving cars. Even real estate developer Evergrande has been financing car manufacturing since last year.
However, according to Caixin’s special article “Siege of Tesla” , the only domestic pure electric car that can compete with Tesla in terms of sales is the Wuling Hongguang MINI EV; but the latter is a low-end model priced at one-tenth of the Tesla Model 3.
The article cites a UBS Securities report that says that in the era of traditional fuel vehicles, Chinese branded cars only account for about one-tenth of the world’s share and have little influence outside of China. The electric vehicle era is a different story. The UBS report scores the electric vehicle sector in China, the U.S. and Europe, and finds that China has surpassed the U.S. in the number one spot.
Another report by Caixin.com, “Who Will Lead the Way,” also notes that Tesla has energized the new-energy vehicle industry, creating a virtuous business cycle, and that the Chinese Communist Party authorities are supporting new-energy vehicles in hopes of “overtaking them in the next lane.
The article also mentions that Huawei is trying to build its automotive capabilities after being sanctioned by the U.S. chip ban; it is currently working with BAIC and Changan Automobile to provide smart car solutions. Caixin reported that Apple, Huawei, Xiaomi and other cell phone makers are coveting the “windfall” of electric cars and pushing cars to become intelligent.
The article quotes UBS as estimating that China may have several leading global automotive and industry chain companies by 2030, capturing nearly half of the global electric vehicle market. In fact, Chinese companies are already among the top tier in electric vehicle batteries, with UBS data showing that Chinese companies account for about 60 percent of the global automotive battery market.
Commentator Li Linyi said, “Although Tesla also enjoys preferential treatment and subsidies from the Chinese Communist Party to open up the Chinese market, the support from the Chinese Communist Party clearly favors Chinese companies. And Tesla became the benchmark for electric vehicles in China, introducing advanced technology and management experience, only to be caught in a lonely battle, imitated and besieged by many CCP-backed competitors, and then catching up step by step.”
Zhang Jiadun: The Chinese Communist Party will not “let him off the hook”
Tesla founder Elon Musk probably didn’t expect that his entry into the Chinese market just over a year ago would usher in a change of face from the Chinese Communist Party.
A photo of a notice banning Tesla parking in a military compound in March 2021 has been circulating on the Internet (online photo)
Since March this year, a photo of a notice banning the parking of Teslas in the family yards of PLA troops has been circulating on the Internet in China.
Earlier, in mid-February, executives of Tesla’s Chinese branch were “interviewed” by five Chinese Communist Party departments and asked to “strictly abide by Chinese laws and regulations”.
In March 2021, CCTV interviewed Tesla CEO Musk, who had just participated in the discussion at the 2021 annual meeting of the China Development Forum. (Screenshot of CCTV video)
In response to the Communist Party’s military ban on Tesla and the official flip-flop, Musk not only clarified that Tesla would not engage in espionage at the China Development Forum in late March, but also praised the carbon emission targets set in the Communist Party’s 14th Five-Year Plan in an interview with CCTV.
However, Dr. Eric Zhang, a leading China expert, told the Voice of America (link) that Musk’s overtures to the Chinese Communist Party may not result in a “pass” for him.
According to Zhang, Xi Jinping wants money and technology from foreign companies, and “he wants to replace them and replace Musk. “Five or 10 years from now, Musk will regret that China (the Chinese Communist Party) has ruined Tesla.”
Another business consultant, Zhang Xun, cited the example of Facebook (Facebook) founder Zuckerberg, who has repeatedly ingratiated himself with the Chinese Communist Party but ultimately failed to knock on the door of the Chinese market. Zhang Xun also believes that the Chinese Communist Party is unlikely to let Tesla go.
However, some political and economic self-publishers in mainland China also commented, “Tesla is a fierce player. If we don’t want it, someone else will.”
The WeChat public number “Sanfaji Zhengdao Office” posted an article on April 19, saying that new energy is the windfall of the times to turn the situation around, and how much technology can be “learned” from Tesla depends on how long it takes root; and Tesla is behind the U.S. Democratic Party, deepening the relationship of interest, in the The United States will have more friends and fewer enemies. The article argues that Tesla is inevitably bullying and arrogant, so it is expected to receive some knocks.
Li Linyi, on the other hand, believes that both the foreign media and the mainland self-published media may be right in their analysis. “Xi Jinping is looking at re-energy vehicles to challenge the United States on new energy and climate change, which are international affairs, and to dominate the international order. Therefore, in the long run the CCP is trying to replace Musk and replace the US.” “But for now, Xi Jinping needs Tesla’s technology and experience to fulfill the CCP’s ambitions.”
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