On April 19, a woman wearing a T-shirt with “Brake Failure” on it suddenly jumped on top of a Tesla at an auto show in Shanghai, chanting various slogans to defend her rights, leading security guards to intervene and take her away.
The official media and various online opinions in mainland China quickly followed up with a “mass attack” on Tesla, criticizing everything from product quality to sales and service attitudes, and even pursuing Tesla’s deep-seated “arrogance”.
At 6:26 p.m. on April 19, the party media Xinhua News Agency published a commentary article saying, “Is it the owner’s indignity or the car company’s indignity that such a thing has happened?”
On April 20, Xinhua News Agency’s Xinhua Daily Telegraph published a commentary entitled “Tesla executives’ arrogant response, who gave Tesla the ‘uncompromising’ bottom line.” According to the article, “No matter which car company, they must have a respect for the Chinese market.” “If car companies are suspected of ‘shoplifting’, the relevant departments must also strengthen their supervision.”
On the same day, “Chang’an Jian,” a media outlet under the Chinese Communist Party’s Political and Legal Committee, posted an article saying, “Tesla should have known from the first day it entered China that to do business in China, it must abide by China’s laws and regulations.”
At 11:25 p.m. on April 20, Tesla was forced to issue a statement on its official microblog, “apologizing for not being able to resolve the owner’s problem in a timely manner,” in the face of the Communist Party’s media siege. The statement said, “Resolutely and firmly, we will actively cooperate with all investigations by all relevant government departments.” To this end, Tesla has set up a special handling team to “cooperate with all relevant government departments in their investigations while conducting strict self-corrections.”
On April 22, the Chinese Communist Party’s CCTV published a commentary, saying, “The matter has come to this point, not that Tesla can solve the problem by saying a few ‘soft words’, nor can it smoothly pass the test by softening its stance.”
There are various boycotts against Tesla all over China, some places won’t let Tesla on the highway, and some parking lots won’t let Tesla park. Tesla became the center of a public opinion storm for a while.
What is wrong with Tesla?
This story should not be unfamiliar to big foreign companies; in 2010, Google got into an argument with the Chinese government because it disagreed with censorship of online content. At the same time, the Chinese Ministry of Propaganda launched a propaganda campaign to criticize Google, claiming that Google China’s search results showed the majority of pornographic content and asking Google to “rectify” the situation, and Google finally chose to withdraw from mainland China.
Subsequently, a lot of insiders were gradually uncovered. In order to push Google out of the competition, a mainland Chinese Internet company, in cooperation with the Chinese Communist Party, paid someone to design automatic search software, which led to a significant increase in Google searches for pornographic content in two months, and handed over the results to the authorities. As Google did not agree to block the blockade, it finally chose to withdraw from the mainland.
Tesla’s situation looks similar to me.
Tesla’s sales in mainland China were almost negligible until 2017, but in 2018 Tesla decided to invest in mainland China in a big way and Tesla’s sales saw a huge increase. Tesla sold just over 1,700 Model 3s in mainland China in 2017, and by 2020, a total of 420,000 Tesla Model 3s and Model Ys will have been sold. Older Chinese EVs, such as BYD, sold less than 70,000 units for the year.
The second-ranked Hongguang MINI car, sold 110,000 units last year. The sales price of the Hongguang MINI, however, is only 40,000 to 50,000 RMB, while the Tesla Model 3 is more than 300,000, and the Model Y is cheaper, but also 160,000 to 170,000 RMB. So this market value is not comparable at all.
China’s EV market has been accounting for more than half of the world’s EVs in terms of vehicle sales over the past few years, which means more than Europe, America and Japan combined. Mainland China does have a number of advantages, such as battery production, with huge advantages in technology and cost. This year Biden launched more than two trillion economic stimulus package, one of the focus is new energy construction, such as building 500,000 charging piles, meaning that the development of electric vehicles is strongly encouraged. Europe and Japan are similar, and the global market for electric vehicles over the next decade is estimated by some to be worth up to $18 trillion.
Previously, the Chinese Communist authorities were quite confident in this, believing that mainland China had developed early, and the battery and supporting manufacturing technology was relatively mature, so it had already “run at the forefront of the world”, and was simply the first, so once the global market expanded significantly, China’s electric cars would undoubtedly rush to the world, and a big profit could be expected.
Not only that, the Chinese Communist government is also heavily subsidizing the manufacturing of electric vehicles on the mainland. The authorities’ subsidies are calculated based on the range of electric vehicles. If an electric vehicle can run more than 400 kilometers with a full charge, the central government subsidizes 25,000 RMB, and some local governments also subsidize up to 25,000 RMB. In other words, an electric car that can run more than 400 kilometers may receive a maximum subsidy of 50,000 RMB from the Chinese government in 2019.
Considering that the Hongguang MINI is a car that sells for just over 40,000 RMB, you can imagine how high a percentage the subsidy accounts for.
However, the performance of Tesla’s entry into mainland China is simply a big pot of cold water poured on the head of the Chinese government, and the kind of cold water with ice cubes. Tesla’s selling price is much more expensive than domestic cars. BYD Han twenty-one million yuan, Tesla Model 3 more than 300,000, performance is far more than BYD, even Model Y, regardless of design and interior electronic facilities are more than BYD more, and Model Y price has now dropped to 200,000 under. The 50,000 subsidies, still can not beat Tesla, domestic electric car, in addition to be able to sell to Africa, other markets basically can not enter, and not only the international market can not beat, even the Chinese mainland market also can not beat. The world’s first cowhide, so to Tesla poke a hole. Beijing can be happy? You know, electric cars and new energy vehicles, is the part of the Made in China 2025 plan “to maintain leadership”, not to catch up.
Elon Musk Musk once said that Tesla is not a car, but a computer that can drive. From the beginning, Tesla has not positioned itself as a vehicle, but as a fully automated, advanced AI system that can walk on its own. This is completely different from the concept of an electric car in mainland China, which is basically a gasoline engine converted to an electric motor. Imagine the example of a cattle car and a car, what would be the concept of just changing a cow to a gasoline engine. It’s like two eras competing with each other, and the result is inevitable, the Chinese mainland electric car will definitely lose.
I reckon that one of Beijing’s aims is to get Tesla to hand over the core technology. So that the cattle cars with engines on the mainland can become real cars.
So, Beijing’s moves against Tesla have long been underway.
On December 4, 2020, Mr. Han (a pseudonym), a Tesla owner in Tianjin, received a court verdict in a trial. The verdict stated that Tesla constituted fraud and should refund RMB 379,700 (about $59,000) to Han for the purchase price of the car and compensate RMB 1,139,100 (about $176,000).
On June 5, 2019, Mr. Han purchased an officially certified used car, model Model S P85, from Tesla’s website for RMB 379,700.
Mr. Han said that on August 24, 2019, while he was driving, the car suddenly broke down and the electric door and brakes all failed. The car was later sent to Tesla’s designated repair center for repair. The test result was that the vehicle’s battery umbrella valve, as well as the insurance, was broken and needed to be replaced. He then asked Tesla to replace the car, but was refused.
In November 2019, Mr. Han found a local vehicle inspection company in Tianjin. The company’s appraisal concluded that Mr. Han’s car had structural damage and was an accident vehicle. Mr. Han filed a lawsuit in court on the grounds that Tesla had sold the accident car by fraudulent means.
On December 4, 2020, a trial was held in Mr. Han’s favor. Tesla appealed against the appraisal results on Mr. Han’s side. The much-anticipated result of the second trial will be announced by May 3 this year.
For a $380,000 car, not only do you have to refund the money, but you also have to pay $1.14 million in damages. This is a sky-high price in mainland China. Those who know the situation on the mainland know that usually Chinese courts only award companies compensation for specific damages. Could it be that this Mr. Han was particularly lucky to have met a judge who was particularly concerned about consumer rights? We all know it’s not possible, because Chinese courts and judges are not named after the law, they are named after the “party”.
There have been many accidents with electric vehicles in China over the past few years, and from January to August 2020, an incomplete count of 20 electric vehicles made in mainland China were destroyed by spontaneous combustion, some of which also affected other vehicles. We have not seen a big storm of public opinion, nor have we seen courts awarding excessive compensation.
Before the Shanghai Auto Show, the Chinese Communist Party had already announced that Tesla was suspected of “leaking secrets” and that party, government and military officials were not allowed to buy Tesla, and that many locations claimed to be “confidential” were also off limits to Tesla. For example, some high-end neighborhoods, Tesla will not be allowed to enter. Because there are senior party, government and military officials living in the community, Tesla on the surveillance camera, you can see the entry and exit of these people, so it is easy to leak secrets.
I must say that this concern is not unreasonable. For example, if an army general’s family lives in a neighborhood in a big city, and if he doesn’t come home for many days in a row, it may mean that he is on a mission. If one or two hundred such things happen, that would indicate a big operation by the Chinese Communist military. If the officer is serving in the Fujian, Zhejiang, or Guangdong military, then the big operation is probably aimed at Taiwan.
These are all common knowledge in the intelligence community and are just the most rudimentary applications of big data. If this officer also drives a Tesla, it is even more important to say that the driving record will have data on where it has gone, and basically all the secrets are clear.
Big data is now the most important means of the world intelligence community, the importance of far more than those super spies, such as James Bond like people.
So Tesla chose to compromise by announcing that it will set up a data center in mainland China and that all data will not be transmitted outside the country, is that safe? Of course not, how can the Chinese Communist authorities trust it? So the final result, I’m afraid, is that Tesla must store its data on data servers held by the Chinese Communist Party. The best way to deal with the Chinese Communist Party is for Tesla’s various data services, including collection, computing, storage and analysis, to be handed over to the Chinese Communist Party-controlled department, otherwise it will never be safe.
This is the second major reason for Tesla’s setback in mainland China, the first being market competition and the second being data security. In fact, many people also consider the third reason.
It is that Musk not only has this Tesla, and Space X, he wants to do a Starlink (Starlink) plan, that is, with 30,000 to 40,000 satellites, to provide the Internet for the world. This concept, to the Chinese Communist Party’s network blockade will constitute a great impact, but the biggest problem is not here, the biggest problem is that this satellite Internet, most likely will become the basis of 6G or 7G Internet, because it covers a wider area and the cost will be lower.
Simply put, the Internet requires wireless signal base stations, and the signals from terrestrial base stations will be blocked by the terrain, so base station construction is always the higher the better, and what’s higher than a satellite? Huawei’s 5G, the Chinese Communist Party has taken great pains to claim that base station equipment and infrastructure and so on are in the lead, it is likely to be replaced by the new satellite-based technology in one go, and the latter advantage, soon becomes a disadvantage. The Chinese Communist Party is also currently stepping up research on its own Starlink, but the rocket technology for launching satellites is relatively backward and cannot compete with Mast’s Space X.
So some suspect that the Chinese Communist Party is exerting enormous pressure on Mast, perhaps with this in mind as well.
So let’s say that what happened to Tesla in China is definitely not a simple problem as an electric car.
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