Elon Musk Reportedly Planning to Visit China in What Could be a Win-Win

According to reports, Tesla (NYSE: TSLA) CEO Elon Musk is planning to visit China and meet newly appointed Premier Li Qiang in what could be a win-win for not only Tesla whose ties with China have soured somewhat but also China.

Chinese President Xi Jinping, who won an unprecedented third term appointed Qiang as the Premier.

While the exact time of Musk’s planned visit is not yet certain and both Tesla and China’s State Council Information Office have not responded to the reports, Reuters reported that the meeting could happen as soon as April.

China is the second largest market for Tesla after the US. However, when it comes to production it is the biggest and arguably the most efficient plant.

Tesla not only satiates the domestic Chinese demand from the Shanghai plant but also uses it as an export hub, especially to Europe where its Berlin plant is still ramping up production.

Tesla shipped 74,402 cars from the Shanghai plant in February of which 33,923 were sold in China and the remaining were exported.

Tesla’s market share in China meanwhile fell to 9% in February 2023 as compared to 10% in the corresponding month in 2022. At the same time, BYD’s market share rose by 10 percentage points to 37% in the month.

China is the world’s largest market for NEVs and its penetration levels are higher than even the Western world.

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Tesla Got a Red-Carpet Welcome in China

Tesla and Musk got a literal red-carpet welcome in China when it set up its Shanghai Gigafactory and got several incentives as it expanded its business in the country.

Tesla managed to set up operations in China without partnering with any Chinese company which was a first for the communist nation. It also managed to get the approvals for its Shanghai Gigafactory in a quick time.

Also, China extended its EV subsidy for some Tesla models. The country had until then reserved the subsidies for domestic manufacturers.

From this year, the country has ended its EV subsidies. Domestic Chinese EV companies have ramped up production and BYD has surpassed Tesla to become the largest NEV (new energy vehicle) seller.

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China’s Relations with Musk have soured

Over the last year, relations between China and Tesla have soared. In 2021, China banned Tesla cars from some government compounds over “spying concerns.”

While Musk denied that Tesla cars could be used for spying, it did not cut ice with China. He even started a new data center in China to store all data collected in the country locally.

Reportedly, China delayed the expansion of Tesla’s China Gigafactory on concerns over Starlink. The country has strict internet firewalls which it believes can be breached by Starlink.

Last month, China chided Musk after he replied to a tweet about the Wuhan lab leak report.

The US Department of Energy concluded with “low confidence” that the COVID-19 pandemic “likely” originated in a lab in Wuhan. The first cases of the deadly virus were first reported from Wuhan.

China meanwhile has been quite sensitive about how many in international media portrayed its handling of the virus.

Musk has Not Visited China Since 2020

Musk last visited China in 2020 days before the COVID-19 lockdowns were imposed. At that event, Musk danced on the stage which was among his most memorable “performances.”

Not many business leaders visited China since the pandemic. However, of late a flurry of business leaders including Apple CEO Tim Cook, and Pfizer CEO Albert Bourla have visited China.

Cook was all praise for China during the visit and hailed the relations between China and Apple.

Notably, amid a structurally slowing economy, China is looking to amend the relations not only with domestic tech companies but also with international companies.

It also seems to be mending relations with Alibaba co-founder Jack Ma who was the face of the country’s tech crackdown.

After spending almost, a year abroad, Ma returned to China which was soon followed by the announcement of Alibaba’s split into six businesses.

If Musk indeed visits China and meets the country’s top leadership, it would be a win-win situation for Musk as well as China-which is now courting foreign investors amid the escalating tech war with the US.

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