When Elon Musk first established the Tesla factory in China, he seemed to have the upper hand.
He gained access to top leaders and secured policy changes that benefited Tesla. It also acclimated workers to long hours and fewer protections, after clashing with US regulators over working conditions at its California plant. The Shanghai factory has helped make Tesla the world’s most valuable car company and Mr Musk extremely wealthy.
But Tesla is struggling now. Mr. Musk has helped create his competition, Chinese electric vehicle makers that are gaining market share and becoming a security concern for the United States and Europe.
Tesla benefited from a Chinese policy he helped shape.
In California, where Tesla launched its first car in 2008, the company took advantage of an emissions mandate that allows it to sell credits — worth billions of dollars — to automakers that can’t meet pollution targets.
As Mr. Musk turned to China, his lobbyists encouraged leaders there to adopt a similar policy. Emails and other documents we obtained show they worked through California environmentalists to clean up China’s air.
Beijing adopted the policy, which was also promoted by groups not affiliated with Tesla, in 2017. After Tesla opened its Shanghai factory in 2020, the company earned hundreds of millions of dollars in credits through the policy, according to the company market analysis CRU Group.
Mr. Musk’s fortune is tied to Tesla’s Shanghai factory.
The Shanghai plant has replaced Tesla’s Fremont, California factory as the largest and most productive, accounting for more than half of the company’s global deliveries and most of its profits.
As the factory took shape in just under a year, Mr. Musk worked closely with a city official who is now China’s premier, Li Qiang. Under Mr. Li’s watch, state-owned banks offered Tesla low-interest loans, a deal so generous that a senior auto industry official recalled a minister turning it down.
China also changed ownership rules so Tesla can set up without a local partner, a first for a foreign car company in China.
Mr. Musk is saving production and labor costs in Shanghai, and he can’t easily bail out if he ever wants to. Because the billionaire’s fortune is tied up in Tesla stock, his personal fortune now depends on what happens in China.
Tesla’s growth in China has tied Mr. Musk to Beijing.
Mr. Musk’s reliance on the Shanghai factory may give Beijing leverage over him.
This is worrying because a second company of Mr Musk’s, SpaceX, has sensitive contracts with the Pentagon and controls much of the global satellite internet through the Starlink network.
Mr Musk said his companies should not be confused. But he has also praised Chinese leaders and taken China’s side in geopolitical disputes, even as he railed against politicians in the United States.
In an online chat with two members of Congress in July, he called himself “kind of pro-China.”
China offered an escape from labor issues.
Mr. Musk, who has suggested that American workers are lazy, has demanded tension at Tesla’s Fremont factory, sometimes even sleeping on the factory floor himself.
In Shanghai, Mr. Musk could escape US regulators and labor organizers.
We spoke to Chinese factory workers who described being asked to work six consecutive twelve-hour shifts during the city’s 2022 coronavirus lockdown.
Some slept on the factory floor, as Mr. Musk had in Fremont. They could choose not to work but 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 offline.
Tesla has pushed EV development in China.
Chinese leaders wanted a Tesla factory to jump-start China’s EV industry. That’s exactly what happened.
In Shanghai, Tesla turned to using locally made batteries and parts, in some cases helping 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 lead in Europe.
And Tesla itself is increasingly vulnerable. BYD’s Chinese rival overtook it in global sales late last year. Without trade barriers, Mr. Musk warned in January, BYD and others “will pretty much demolish most other car companies in the world.”
