Elon Musk's 'Symbiotic' Relationship with China Is Now a Concern for Tesla

Elon Musk’s Tesla has found tremendous success in China, but the symbiotic relationship between the billionaire entrepreneur and Beijing is drawing scrutiny from U.S. policymakers as the billionaire supports the communist country in international issues.

The New York Times reports that when Elon Musk opened Tesla’s first Chinese-made factory in Shanghai in 2020, it cemented a deep relationship between the billioniare and the communist country. China became a flagship for Musk’s EV ambitions, accounting for over half of the company’s global deliveries and the bulk of its profits.

Musk secured concessions rarely offered to foreign businesspeople, such as building the Shanghai factory without a local partner and gaining access to senior Chinese leaders. He worked closely with Li Qiang, then Shanghai’s top official and now China’s premier. Tesla also benefited from an estimated hundreds of millions of dollars in profits due to a crucial policy change on national emissions regulations, following lobbying by the company.

SHANGHAI, Jan. 7, 2020 — Tesla CEO Elon Musk poses with Tesla China-made Model 3 vehicle owners during a ceremony in Shanghai, east China, Jan. 7, 2020. (Photo by Ding Ting/Xinhua via Getty)

Breitbart News Senior Contributor Peter Schweizer explained in his book Red-Handed that Musk initially denied he would open Tesla factories in China, then dramatically changed his tune.

According to Red-Handed:

Then Beijing rolled out the red carpet: Chinese government–backed banks coughed up $1.6 billion in subsidized loans. And the regulatory red tape to build in China was eliminated by government authorities. “What surprised me is how little time it took for the regulatory process to get approved by the Chinese government,” explained Ivan Su, an analyst at Morningstar Inc. The enormous plant was built in less than a year.

Musk arrived in the country for the groundbreaking ceremony and met with top-ranking officials. Two days later, he was meeting with Vice Premier Li Keqiang in the private compound reserved for high- ranking visitors. “I love China very much and I am willing to come here more,” Musk reportedly told Li. The vice premier offered to make him a permanent resident in the country.

Now, interviews with former Tesla employees, diplomats, and policymakers reveal how Musk built an unusually symbiotic relationship with Beijing, profiting from the Chinese government’s largesse even as he reaped subsidies in the United States. In California, Tesla has enjoyed strong regulatory support, earning $3.71 billion in credits under the state’s emissions mandate by late 2023. Musk downplayed Tesla’s reliance on government help, but former regulators said the policy helped keep the company afloat when it was struggling.

Tesla joined forces with environmentalists to push for a similar emissions mandate in China, modeled after the California program. Grace Tao, a Tesla lobbyist, met with the Innovation Center for Energy and Transportation (iCET), an environmental nonprofit, to discuss working together on the policy. Chinese officials were initially skeptical, but Tesla’s interest in building a factory in the country helped sway them. In 2017, China adopted the emissions mandate, marking Tesla’s first big win there.

Tesla’s factory in Shanghai went up at record speed, with Mr. Li’s help. State-run banks offered Tesla over 11 billion yuan ($1.5 billion) in low-interest loans, a deal so generous that it raised eyebrows among some government officials. The factory also created a market for Chinese suppliers, with 95 percent of components used in the Shanghai plant being locally sourced. Key suppliers, such as battery maker CATL and casting machine manufacturer LK Group, have grown alongside Tesla.

However, Tesla’s success in China has come at a cost. The company is increasingly losing its edge to Chinese competitors in the market Musk helped create. Chinese automakers like BYD and SAIC are now pushing into Europe, threatening established carmakers. Tesla’s reliance on China has also tethered Musk to Beijing in a way that is drawing scrutiny from U.S. policymakers, particularly given his other ventures, such as SpaceX and its Starlink satellite internet network.

Musk has taken China’s side in several international disputes, including making a case for Beijing’s control over Taiwan and arguing that there are two sides to the repression of Uyghurs in Xinjiang. In 2021, as other companies were pulling back from Xinjiang, Tesla unveiled a charging line ending there, which it called the Tesla Silk Road, after the historic route revived by Chinese leader Xi Jinping in a campaign for global influence.

Despite rising competition, Musk remains strong in China. In October 2022, Li Qiang was promoted to China’s No. 2 spot. Musk is also building a battery factory in Shanghai, which a state-owned research firm said last year would use CATL cells. Late last year, Musk attended an exclusive reception for Xi Jinping in San Francisco, where he posted a photo on Weibo of him shaking hands with the Chinese leader, captioning it, “May there be prosperity for all.”