GT Voice: Tesla success tells of indispensability of China to multinationals
Published: Nov 02, 2021 09:06 PM
SpaceX owner and Tesla CEO Elon Musk gestures at a launch event at Shanghai gigafactory in January 2020. Photo: cnsphoto

SpaceX owner and Tesla CEO Elon Musk gestures at a launch event at Shanghai gigafactory in January 2020. Photo: cnsphoto

Tesla's shares jumped sharply again on Monday, extending last month's momentum into November. The continued strength of the world's leading electric vehicle maker, which just became the sixth company in US history to cross $1 trillion valuation last week, can be seen as a microcosm of the close business cooperation between the US and China, despite their diplomatic tensions.

As of the Monday close, Tesla's stock price soared about 50 percent in the last 25 trading sessions. One catalyst for its surge was its record quarterly revenue and profit in the third quarter which was released on October 20, while another was the news on October 25 that Hertz announced an order of 100,000 Tesla vehicles to build up its electric vehicle rental fleet by the end of next year.

Nevertheless, the carmaker's production capacity is the key to its success, which meet growing market demand. Several years ago, Tesla was even on the verge of bankruptcy when it was struggling on how to mass produce the Model 3 sedan to meet unfulfilled orders. 

The firm's production bottleneck was not resolved until things changed at the beginning of 2020 when Tesla's Gigafactory 3 in Shanghai started to deliver locally produced Model 3 sedans to customers. The Shanghai Gigafactory has enabled Tesla's stock prices to run the upward swing, which soared up to 190 percent since the end of 2019.

On Tuesday, Elon Musk, Tesla's CEO, tweeted an ancient Chinese poem about boiling beans, a metaphor for averting cut-throat rivalry between two brothers. While the poem sparked heated discussions among netizens trying to figure out what Musk was referring to, one thing is certain -- that the world's richest man has attached great importance to China.

The manufacturing prowess and market size of China have contributed significantly to Tesla's success. In September, Tesla China hit a new sales record of 56,006 vehicles, up 27 percent month-over-month and 394 percent year-over-year. Meanwhile, the Shanghai Gigafactory continues to maintain its strong production capacity and has become a main vehicle export hub of Tesla.

Despite current global supply chain bottlenecks, Tesla's phenomenal sales and outstanding performance best manifest business cooperation between the world's two largest economies -- refuting those who always hype up supply chain decoupling between China and the US.

Since Trump's trade war in 2018, there have been plenty of conspiracy theories that American companies would shift their supply chains out of China, but Tesla and many other American firms have ratcheted up their investment and expanded their foothold in China. It is an indisputable fact that economic and trade exchanges between China and the US have become more frequent.

China has developed its own unique comparative advantages, such as its huge market, skilled labor force and advanced industrial infrastructure. China owns a complete industrial system that makes it the only country in the world to encompass all the categories listed in the UN's industrial classification.

Therefore, instead of leaving China, those engaged in advanced manufacturing, are actually being attracted to China. This again speaks of the uniqueness and indispensability of China to successful multinational corporations.