The deal was a turnaround for Tesla. The Shanghai factory will be the company’s largest production base, serving both the Chinese and export markets.
Why did Shanghai, and China, sign a deal with Tesla and risk exposing the American company to intense competition from Chinese EV companies? As the Western narrative suggests, China Maybe they want to protect it from foreign competition?
01:25
Elon Musk meets with Premier Li Qiang in Beijing during Tesla’s bid to promote self-driving technology
Elon Musk meets with Premier Li Qiang in Beijing during Tesla’s bid to promote self-driving technology
Tesla’s Gigafactory began production in December 2019. By 2022, local companies will supply 95 percent of the parts needed. His many EV parts suppliers, led by Tesla, have grown into an extensive ecosystem. Similar ecosystems have since sprung up across the country to serve Chinese EV manufacturers.
This is symbolic of China’s approach to foreign companies. We value their contributions to technology, innovation and capacity building and are happy to accommodate them for mutual benefit. The nod to Tesla’s plans to promote autonomous driving is seen in the same spirit as the Gigafactory decision. This sentiment is shared by companies like Tesla.
01:06
President Xi Jinping tells German Chancellor to seek ‘common ground’ to strengthen ties
President Xi Jinping tells German Chancellor to seek ‘common ground’ to strengthen ties
Also last month, Luxembourg-based steelmaker ArcelorMittal announced plans to invest in a major project in Changzhou, Jiangsu province, to produce magnetic materials for the clean energy sector, including electric vehicles.
While there have been reports of foreign companies withdrawing from China or relocating parts of their supply chains to other countries, especially during the COVID-19 pandemic, many other companies are also Japan is strengthening its involvement in China. In fact, many people are doubling down on their investments in China.
Many foreign and Chinese companies have played an important role in developing an extensive supplier ecosystem across China, often with support from local governments. Governments will give financial and other support to large manufacturers, but the expansion of the supplier ecosystem, the expertise gained, the innovation generated and, of course, the resulting benefits to various companies. We are also assessing the broader value-added impact, including: employment and tax revenue.
This requires a high degree of organization and coordination by China’s local governments. Achieving this revolves around synchronizing many moving parts. After decades of experimenting, learning, and adapting, governments like Hefei, Suzhou, Shanghai, and Shenzhen have become very good at this job.
01:11
China’s BYD overtakes Tesla to become world’s largest EV maker
China’s BYD overtakes Tesla to become world’s largest EV maker
Mr. Musk is a smart man. He knows he can negotiate with the Chinese. And the Chinese government is willing and ready to negotiate. It’s a case of give and take, and in the end both sides win. that’s ok.
Edward Tse is the founder and CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China.
