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How Elon Musk became 'kind of pro-China'

by SuperiorInvest

When Elon Musk first set up Tesla's factory in China, he seemed to have the upper hand.

He gained access to top leaders and achieved policy changes that benefited Tesla. He also accustomed workers to long hours and fewer protections after clashing with U.S. regulators over working conditions at his California plant. The Shanghai factory helped make Tesla the most valuable car company in the world and made Musk ultra-rich.

But Tesla is now struggling. Musk helped create competition for him: Chinese electric vehicle makers that are gaining market share and becoming a safety concern for the United States and Europe.

In California, where Tesla launched its first car in 2008, the company has benefited from an emissions mandate that allows it to sell credits (worth billions of dollars) to automakers that can't meet pollution targets. .

When Musk turned to China, his lobbyists encouraged that country's leaders to adopt a similar policy. Emails and other documents we obtained show they worked through California environmentalists trying to clean up China's air.

Beijing adopted the policy, which was also being promoted by groups outside of Tesla, in 2017. After Tesla opened its factory in Shanghai in 2020, the company earned hundreds of millions of dollars in credits through the policy, according to the company. CRU Group market analysis. .

The Shanghai factory has replaced Tesla's plant in Fremont, California, as its largest and most productive, accounting for more than half of the company's global deliveries and most of its profits.

As the plant took shape in just under a year, Musk worked closely with a city official who is now China's premier, Li Qiang. Under Li's direction, state banks offered Tesla low-interest loans, a deal so generous that a senior auto official recalled that a minister objected.

China also changed ownership rules so Tesla could establish itself without a local partner, a first for a foreign car company in China.

Musk saves on production and labor costs in Shanghai and cannot easily free himself, if he ever wanted to. Because the billionaire's wealth is tied up in Tesla stock, his personal fortune now depends on what happens in China.

Musk's dependence on the Shanghai factory may give Beijing leverage over him.

This is concerning because a second Musk company, SpaceX, has sensitive contracts with the Pentagon and controls much of the world's satellite Internet through its Starlink network.

Musk has said his companies should not be combined. But he has also praised Chinese leaders and sided with China in geopolitical disputes, even as he criticizes U.S. politicians.

In an online conversation with two members of Congress in July, he called himself “kind of pro-China.”

Musk, who has suggested that American workers are lazy, demanded intensity at the Tesla factory in Fremont, sometimes even sleeping on the factory floor himself.

In Shanghai, Musk could escape American regulators and labor organizers.

We spoke to Chinese factory workers who described being asked to work six consecutive twelve-hour shifts during the 2022 coronavirus city shutdown.

Some slept on the factory floor, as Musk had done in Fremont. They could choose not to work, but in exchange for a pay cut, they said.

When a worker was crushed to death by machinery last year, a government report citing safety gaps was taken down online.

Chinese leaders wanted a Tesla plant to boost China's electric vehicle sector. That's exactly what happened.

In Shanghai, Tesla shifted to using locally made batteries and parts, and in some cases helped suppliers develop technologies that they then sold to Chinese electric vehicle makers. Tesla also trained a generation of talent.

Now Europe and the United States are trying to catch up. French Finance Minister Bruno Le Maire says China has a five to seven year head start over Europe.

And Tesla itself is increasingly vulnerable. It was surpassed in global sales by its Chinese rival BYD late last year. Without trade barriers, Musk warned in January, BYD and others “will virtually demolish most other car companies in the world.”

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