Source: City Boundaries
Authors: Cheng Liang, Liu Dongxue

What did Musk do in China?

After a lapse of three years,$Tesla (TSLA.US)$CEO Elon Musk is visiting China again.

On the afternoon of May 30, an image of Musk's private jet parked at the capital airport was circulating online. Discerning netizens discovered that on the morning of the same day, Musk posted an update on Weibo, saying “China's space program is far ahead of what most people realize.” However, the IP address of this microblog post belongs to Beijing.

Since then, news of Musk's visit to China has gone viral on social media. On popular Weibo searches, the topic “Musk's private jet landed in Beijing” was read 130 million times, and various topics such as “What did Musk eat at dinner on the first day in Beijing” hit the headlines, and the recently revealed “Musk's trip to China” was also featured on Baidu's Hot Searches.

If you think back to the last time Musk came to China, it was three years ago. At the time, he uploaded songs and dances at the launch ceremony of the Shanghai Gigafactory and delivered the first batch of Model 3 to Chinese consumers.

Three years later, Musk, who had just completed a shareholders' meeting in the US and was preparing to expand its factory, went without stopping to China, Tesla's second-largest market in the world and the world's largest production center.

According to news from netizens, on the night Musk came to China, he went to dinner at the Manfu banquet at the top club in Washington. The dinner had 16 dishes. There were no roast duck, but he tasted fried noodles.

However, compared to what Musk ate on his first day in Beijing, outsiders are more concerned about the purpose of his visit.

One news is that Tesla intends to expand the size of its Shanghai plant. After the expansion, its annual production capacity will increase from the current 1.25 million units to 1.75 million units.

There is also news that with regard to Tesla's FSD (fully autonomous driving), which is becoming popular, Musk hopes to play a role in the Chinese market as well. He needs to obtain Chinese qualifications and verify whether it is safe, mature and reliable enough.

Interestingly, yesterday afternoon, a photo of Musk's meeting with Chairman Zeng Yuqun of the Ningde Era was also circulating on the Internet.

As to the authenticity of the photo and related information, the “market community” sought evidence from Tesla China, and as of press time, no response had been received to refute the rumor.

Merco, founder of the Truth Research Institute, told the “market community” that when the progress of Tesla's 4680 battery production plan is unsatisfactory, in-depth communication with the boss of the Ningde Era is necessary due to the guarantee of its own battery demand.

Also, according to analysis by industry insiders, the meeting between the two sides may be related to Tesla's energy storage gigafactory that just landed in Shanghai.

According to reports, this gigafactory is dedicated to the production of Tesla Megapack (ultra-large commercial energy storage batteries), which is essential for Tesla to achieve the goal of 100% global energy sustainability by 2050, and the lithium iron phosphate battery cells it uses have plans to be purchased from Ningde Times.

At the end of March, Tesla announced plans to cooperate with Ningde Era to build a factory in North America, and the new plant will be tentatively scheduled in Texas.

A person who is deeply involved in the battery industry told the “market community” that compared to other materials, lithium iron phosphate costs less, has a more stable structure, a better number of cycles, and has the advantage of energy storage. In this regard, Chinese companies have done more than Japan and South Korea.

“The energy storage business is more aimed at the B-side, and there is more room for imagination later, but subsequent cooperation may also be limited due to excessive market coverage.” The people in the industry mentioned above believe that for Tesla now, China's Ningde era may be the best choice right now.

IPG China's chief economist Bai Wenxi also said that the meeting between Musk and Zeng Yuqun not only provided room for industry discussions and exchanges, but there was also a great possibility of business cooperation. However, whether it is a pragmatic discussion and exchange or a pragmatic business cooperation, this exchange is an opportunity for global leaders and industry giants in both fields that may change the direction and pattern of the industry.

The news of Musk's visit to China led to a rise in the company's stock price. At the close of trading on May 30, Tesla's stock price rose by more than 4%, and its market capitalization rose more than 25 billion US dollars overnight (equivalent to 180 billion yuan).

“Catfish” have been in China for more than ten years

After all, this is the 11th year Tesla has entered the Chinese market.

According to Tianyan's investigation, Tuosule Automobile Sales (Beijing) Co., Ltd. was established in November 2012, with a registered capital of 2 million US dollars, and later changed its name to Tesla Motors (Beijing) Co., Ltd. In November 2013, at B2 Qiaofu Fangcaodi, No. 9 Dongdaqiao Road, Chaoyang District, Beijing, Tesla's first experience store in China began trial operation, thus kicking off Tesla's entry into China.

Half a year later, the first group of Chinese users took over the keys to Model S from Musk. They were Wang Dongfeng, Chairman and CEO of Yunyou Holdings; Yu Yongfu, Chairman and CEO of UC YouTV; Pan Yanming, Executive Vice President of Times Group; Xu Liang, Chairman of Heyi Capital; Zhang Han, famous CCTV television producer; Li Xiang, then CEO of Auto Home; Dong Xiaoli, general manager of Sany Investment; and Yin Xidi, chairman of Lifan Football Club.

That delivery event was Musk's first visit to China. During this period, he said that for Tesla's future, China is a very important market, and Tesla will make huge investments here.

At the time, Musk proposed that Tesla charging stations be allowed to enter China, give Tesla different tariffs than fuel cars, and compete fairly with domestic car companies.

However, at that time, China was considering tax reforms for electric vehicles, and specific rules were still being formulated. Before the reform is completed, Tesla still needs to pay 25% tariffs, just like traditional fuel vehicles.

Although Musk didn't get what he wanted that time, it planted the seeds for Tesla's continued investment in China in the future.

Three years later, the Ministry of Industry and Information Technology issued the “Medium- and Long-Term Development Plan for the Automobile Industry” on April 16, 2017, announcing that it would ease the investment restrictions for foreign-funded automobile manufacturers when operating production cooperation enterprises in China, and raise the investment limit by 50% by 2025. Previously, in order to protect local companies, foreign automobile manufacturers were banned from building wholly owned factories in China.

The news quickly reached Musk's ears. It was only a week after the New Deal was released, and Musk appeared in Beijing. Since then, news about Tesla building a factory in China has continued to spread.

On July 10, 2018, Musk arrived in Shanghai and jointly signed an investment agreement for the pure electric vehicle project with the Shanghai Port Management Committee and the Lingang Group, setting the stage for speculation.

On January 7, 2019, the largest foreign-funded manufacturing project ever in Shanghai, the Tesla Gigafactory, officially began construction in the Lingang Industrial Zone. After nearly 10 months of construction, the first phase of the plant was ready for production, and production of Model 3 began at the end of that year; on January 7 of the following year, Model 3 was officially delivered.

After the first phase was completed and put into operation, Tesla's Shanghai Gigafactory began construction of the second phase in 2020, and production of the Model Y began at the end of the year.

According to CPC data, in 2022, Tesla's Shanghai Gigafactory delivered 710,000 vehicles a year, more than half of Tesla's global delivery volume. Today, the plant has an annual production capacity of over 750,000 vehicles, making it Tesla's highest-producing vehicle factory.

As far as Tesla is concerned, double happiness is that not only has the Shanghai Gigafactory started construction, but the domestically produced Model 3 and Model Y can also enjoy the national new energy subsidy policy.

Although for many car peers, Tesla's “catfish” is a relatively threatening opponent. Since entering China, it has continuously stirred the market in terms of price, technology, and marketing model, but this has also fully boosted the development of the domestic new energy market.

According to CPC data, in 2022, Tesla's sales volume in the Chinese market reached 4,39,770 units, an increase of 7.8% over the previous year, second only to BYD and SAIC-GM-Wuling among new energy manufacturers.

In the same period, data from the Ministry of Industry and Information Technology showed that in 2022, China's NEV production and sales reached 7.058 million units and 6.887 million units respectively, up 96.9% and 93.4%, respectively, and remained number one in the world for eight consecutive years; sales of new energy vehicles reached 25.6% of the total sales volume of new vehicles.

When the “wave of foreign company executives visiting China” was underway

Musk is just one of many foreign executives visiting China in recent years.

Before him,$Apple (AAPL.US)$CEO Cook,$Qualcomm (QCOM.US)$President and CEO An Meng; Chairman Zipce; Samsung Electronics Chairman Lee Jae-hyeong;$Intel (INTC.US)$CEO Kissinger and others have visited China.

Recently, according to media reports, J.P. Morgan CEO Jamie Dimon, the “most powerful person” in the US financial industry, will host a series of summits in Shanghai starting May 31.

According to reports, business giants such as the CEO of Starbucks and Pfizer in the US, Australian mining billionaire Andrew Forrester, and Mei Zhiming, founder of Singaporean warehouse operator Prolose (GLP), will attend the conference, while domestic Baidu founder Li Yanhong, CEO of Geely Holdings, and Li Ke, executive vice president of BYD, will also attend the conference.

More and more executives from foreign companies are visiting China, which is also inseparable from the current international situation.

Although major powers are competing in the fields of new energy, finance, chip technology, etc., entrepreneurs doing business in China know how important China is in the global market. China's initiatives such as win-win cooperation, common development, adherence to free trade, and maintaining a stable and smooth supply chain in the global industrial chain have also resonated widely.

Not long ago, Charlie Munger, a well-known American investor, said, “We should get along well with China and conduct a lot of free trade. This is in our common interest.”

Intel CEO Kissinger also said in his speech during his previous visit to China, “China is one of the largest markets in the world and one of Intel's most important markets.” Financial reports show that in 2022, Intel's revenue in China reached 17.125 billion US dollars, accounting for 27% of its total global revenue. It is already Intel's largest sales location outside the US.

Another person who emphasized the need to enjoy a symbiotic relationship with China was Apple CEO Cook. You know, of Apple's more than 180 suppliers, about 150 are in China. In the first quarter of this year, Apple's revenue in Greater China was 17.812 billion US dollars, accounting for nearly 20% of the company's total revenue.

Musk's current visit to China comes at a critical time when China's NEV market is in a critical period of intense change in the competitive landscape.

Not long ago, Tesla just recalled 1.1 million cars in the Chinese market because the “single pedal mode” could easily cause drivers to step on the accelerator pedal by mistake. Musk's subsequent trip to China and what changes Tesla will bring to China's new energy market is worth continuing attention.

Editor/Hoten