Tesla's path in China brightens as Musk courts Trump and Xi | Elon Musk

While it pays to have friends in high places, few of us can claim to be in a better position than Elon Musk, the richest man in the world and one of the only people to maintain warm relations with Donald Trump and Xi Jinping. Its trade and political ties with both countries could prove crucial as the U.S.-China feud plays out over the next four years, especially as Trump promises steep tariffs.

Musk, the billionaire CEO of Tesla and SpaceX, once supported Joe Biden. But his relationship with the current US president has deteriorated over the past four years because of, among other insults, Musk. felt that the White House gave the cold shoulder to Telsa, his car and green energy company. Trump, for his part, describe Tesla is also incredible in committing to removing subsidies for electric vehicles. This year, Musk officially endorsed Trump as a presidential candidate, campaigned for him online and offline, and donated more than $100 million to his re-election efforts.

Musk's loyalty has been rewarded with his appointment to head a new Department of Government Effectiveness (Doge), which, despite its name, will be an advisory body and not a government agency. But his influence on the dynamic between the leaders of the world's two superpowers may be more important to the global economy than his official role. With a trade war started by Trump and expanded by Biden, and growing geopolitical tensions, relations between the United States and China have been deteriorating for years, with negative global consequences, particularly for American and Chinese consumers. who saw prices increase as a result.

Unlike other figures in Trump's newly appointed cabinet, such as China hawk Senator Marco Rubio, Trump's choice for secretary of state and who was hit with sanctions by Beijing, Musk maintains warm relations with the top Chinese leaders.

Musk has visited China several times, most recently in April, when he made a surprise trip to Beijing to meet Chinese Premier Li Qiang. Last year, he met with Chinese President Xi Jinping in San Francisco.

The relationship between Musk and Li, the second-highest-ranking figure in China, is particularly close: Li was party secretary in Shanghai in 2019, when Tesla opened its first overseas factory there, which is now the largest Tesla factory in terms of production. It was built with loans of $521 million from Chinese state-owned banks, which were issued at favorable interest rates. The Shanghai government gave Tesla a favorable corporate tax rate by 15% between 2019 and 2023, below the standard of 25%. Tesla too would have managed to become the first foreign automobile manufacturer to be able to establish itself without a local partner.

And construction has now begun on a second $200 million Tesla factory in Shanghai, which is expected to produce around 10,000 large-scale lithium-ion batteries, called Megapacks, per year. Lithium batteries are one of China's three new priority industries as Xi tries to pivot the economy toward high-tech and renewable infrastructure. The other two focus areas, electric vehicles and solar panels, are also both Tesla products, although to a lesser extent when it comes to solar panels.

With significant investments in two of China's three economic priorities, Musk has been welcomed to the country with open arms. Report on the new battery factory in Shanghai, China state media said: Despite the intensifying US crackdown on China's new energy vehicle (NEV) sector, Tesla has chosen to invest more in China. This highlights industry leaders' strong confidence in China's high-tech progress.

Musk is clear in his support for the country and its government, which many in Washington view as the greatest threat to the United States. He has describe China is truly amazing and tweeted its gratitude to the Chinese government for supporting Tesla's activities in China. The country represents approximately a quarter of Tesla's global revenue and the lion's share of vehicle manufacturing capacity. The Shanghai factory has the ability manufacture more than 950,000 cars per year, compared to more than 650,000 for the Californian factory.

Chinese leaders may therefore want to exploit their support for Tesla to obtain concessions from the new Trump administration, via Musk.

Trump has promised to introduce 60% tariffs on all Chinese imports, angering Beijing and exacerbating an already tense relationship. Taxes on Chinese electric vehicles are already 100%, which Musk has criticized, while warning that Tesla will be demolished if it is not financially protected against companies like BYD.

Trump promised that U.S. tariffs on Chinese electric vehicles would protect American automakers. But the integrated nature of the electric vehicle supply chain and China's advanced position in battery technologies and raw materials needed for electric vehicles mean that few companies, including Tesla, can eliminate the need for Chinese coins in their products. For example, in October, following the latest round of US tariffs, which increased the tax on Chinese lithium-ion EV batteries from 7.5% to 25%, the Tesla Model 3 car became unavailable at sale in the United States. The car uses batteries manufactured by the Chinese company CATL.

Daniel Ives, global head of technology research at Wedbush Securities, a financial services company, predicts that Musk will use his relationship with Trump to negotiate favorable terms for Tesla and its interests in China, such as exemptions for Tesla and other companies battery-powered electric vehicles. These negotiations could go so far as to temper Trump's trade war with China. To have [Musk] There, it somewhat offsets the hawkishness of Rubio and others, Ives said.

“I think there will be exclusions for Tesla on tariffs, as well as China,” Ives said. That's why it's so important that Musk plays an important role in the Trump presidency.

Additional research by Jasper Jolly