Wednesday, May 22, 2024

"Tesla’s in China – It’s just a question of how long" (TSLA)

The writer appears to think Mr. Musk is a naïf or even a Candide, blissfully unaware that all may not be for the best in this best of all possible worlds.

Wrongo, Bucko. Musk has a minor depression, possibly akin to Churchill's “Black Dog” that leads him to catastrophize worst case scenarios without succumbing to the debilitating effects (learned helplessness, hopelessness, suicide) you'd look for in a victim of a major depression.

He would be a good risk manager. The ketamine probably helps.

From Asia Times, May 22:

A foreign company lasts until the party perceives there’s no more utility to be gained, then the hammer comes down 

One day the Tesla experience in China will be a business school case study, though not in a good way.

Elon Musk thinks he has a special relationship with powerful Chinese officials. There is evidence, he says. He cites Tesla as the first foreign automaker not required by the Chinese government to take on a local partner.

However, the Chinese communists are highly skilled at playing world-renowned elite to their tune. And the “special relationship” reels them in every time.

This has nothing to do with the global slowdown in electric vehicle sales.

China’s foreign business ‘utility timetable’
In Musk and Tesla’s case, the “takeover” was scheduled when Tesla started sniffing around the idea of locating in China. The clock then started ticking on what a friend with decades of experience in China calls the Chinese Communist Party‘s (CCP’s) “utility timetable.”  

The history of foreign ventures in the People’s Republic of China (PRC) goes like this: 

  • Foreign company flourishes with unlimited local support. 
  • Foreign company builds a market. 
  • Foreign company becomes the operating model for local providers to copy.
  • A local company and its stakeholders build up proficiency at some level of sustainability, sometimes by poaching key employees and intellectual property. 
  • Foreign company starts coming under pressure whose goal is driving it out of the market or forcing it to sell its assets to the local company.
  • Local company takes over the market with second-rate products. 
  • Foreign company exits China.

A foreign company lasts as long in China as it provides utility to the party.  

When the party perceives no more utility to be gained, the hammer comes down.  

By the time Tesla went into China this had happened so many times before that it should have been obvious. Now, the CCP’s  “utility timetable ” for Tesla seems to be accelerating.

Reeling In Tesla
Part of the timetable – a key inevitable telltale sign the end is coming – is the foreign company is pressured to put its China operations under the control of a Chinese citizen. This citizen is also subject to the country’s national security laws, including the 2017 National Intelligence Law. That law requires Chinese citizens and companies to support PRC intelligence operations....


 Our readers know the risks the writer lays out. Most recently:

March 17, 2024
"India Tailors Electric-Vehicle Tariff to Lure Tesla" (TSLA)
Mr. Musk has to thread the needle on this one lest his Chines supply chain begin experiencing, ah, slowdowns. Alternatively, he goes big fast, in which case he might just leave the Chinese market to BYD and the other half-dozen Chinese EV manufacturers that will be among the survivors of the coming shakeout....
May 17, 2024
Reuters Exclusive: Musk pushes plan for China data to power Tesla's AI ambitions (TSLA)
Mr. Musk is walking a tightrope between American and Chinese national security concerns and more probably the use of faux concerns as an excuse to rein him in should doing so seem like the thing to do for either government.

We wish him luck and think he will succeed with the autonomous vehicle push but the risks increase with dependency on governmental goodwill.

The point is deadly serious, you had better know what you are up against when venturing into the big kids' sandbox. Our first inductee into the Climateer Hall of Fame was deadly serious as well:

...As always, heed the wise words of our first inductee into the Climateer Hall of Fame....
....On the issue of the Chinese government attitude toward controlling information, its uses and its flows, the October 2019 post "So You Want To Do Business In China Do You? "China’s New Cybersecurity Program: NO Place to Hide" embedded in a post last week is a quick primer on what the Party and government think.

As Intel's Andy Grove famously said:

“Business success contains the seeds of its own destruction. 
Success breeds complacency. Complacency breeds failure. 
Only the paranoid survive.”

Mr. Musk has his blind spots but China sneaking up on Tesla probably isn't one of them. He knows that Western companies will eventually lose the battle for electric vehicle dominance and something that he saw sometime in the last couple years seems to have scared him into action on the fronts where Tesla has a competitive advantage: access to some truly brilliant people; artificial intelligence facilitated by a long history with Nvidia and autonomous vehicles.

So again, we wish him luck, and think he'll succeed but this stuff is serious business.