Tesla is facing threats left and right. According to CEO Elon Musk, the solution is to look eastward to China.
Tesla CEO Elon Musk was in China on Tuesday, meeting with foreign minister Qin Gang and CATL chairman Zeng Yuqun. China is Tesla’s second biggest market after the United States and is also the world’s biggest car market.
China’s push towards EV technologies has increased in the past few years, with new important players on the market, like Li Auto, establishing their position. Tesla has sought expansion in the East-Asian country for years, recently opening their biggest factory in Shanghai.
But Tesla also sees in China a threat for their future, being a foreign market with extremely niche tastes. So far, Tesla’s attempts at piercing consumer needs in China have underperformed.
The meeting between Musk and the Chinese foreign ministry was crucial to strengthen Tesla’s position in the country. After the meeting, Qin Gang declared his commitment to further cooperation with US companies, calling for an improvement in the business environment.
Qin also addressed the complicated US-China relationship, saying “We must step on the brake in time, avoid dangerous driving and be skillful at using the accelerator to promote mutually beneficial cooperation."
The other meeting with Zeng Yuqun was crucial for Musk to understand Tesla’s moves in the future. CATL is one of China’s largest battery manufacturers and Tesla’s chief supplier. However, the details of the meeting are presently unknown.
A golden goose
Elon Musk’s intentions of expanding Tesla’s operation into China are as obvious as risky. Not only is China’s the biggest market for electric vehicles, it also keeps expanding year after year.
As analyst Daniel Ives put it, China is “the golden goose EV market”.
But, as we said, meeting the demand of Chinese customers is no straightforward task, especially for a US-based company. China’s own car manufacturers are simply better suited for local consumers, and competition is rising.
Tesla’s proprietary “autopilot” software provides little to no competitive advantage as it’s unclear whether China’s government will allow it. Chinese EV firms are already rolling out with their version of this technology, though their effectiveness is unclear.
The harsh truth is Tesla has lost almost 20% of market share in four years. A tremendous drop that will only increase if Tesla does not come out with new car models soon.
Their market share remains at a solid 62%, and the Model Y is still one of the most sold cars in the world. But giants fall too, and Tesla is not the exciting new company it used to be.
