Musk warmly welcomed
China’s high-level opening-up, pursuit of win-win cooperation, to attract more investment: experts
Published: Jun 01, 2023 05:27 PM
Tesla displays a vehicle suspension at the center of its booth at the 
China International Consumer Products Expo in Haikou, South China's Hainan Province, on April 12, 2023.Photo: Xie Jun/GT

Tesla displays a vehicle suspension at the center of its booth at the China International Consumer Products Expo in Haikou, South China's Hainan Province, on April 12, 2023.Photo: Xie Jun/GT

Three years after dancing on the stage during an event at the Shanghai Gigafactory, Tesla CEO Elon Musk is now back in China -- the US auto firm's second largest market.

Each time Musk visits China, he attracts much fanfare and receives high-level receptions by senior officials. More importantly, he has consistently pushed forward Tesla's footprint in the country. 

This time marks Musk's 10th trip to China, surpassing the number of trips made by chief executives of most other multinational companies. Different from previous visits that Musk focused on the electric vehicle (EV) business, experts said that during this trip, he could tap into the energy sector including renewable energy generation and storage.

Front and center is his EV business. Musk is expected to expand the capacity of the Shanghai Gigafactory, Yale Zhang, head of Shanghai-based consultancy Automotive Foresight, told the Global Times.

As global auto demand weakens, coupled with the intensifying competition from more than a dozen of EV makers in China, Tesla needs new models to boost sales and revenues, Zhang said.

Sales and revenues

Tesla announced early last year that it would launch a new Model 3 with upgrades to the interior and the powering system. Musk also teased two new EVs at Tesla's annual shareholder's meeting in May, one of which is believed to be the so-called 'Model Q' or 'Model 2' hatchback, which will be cheaper and smaller than Model 3.

"The mass production of new products is highly likely to be based in its Shanghai Gigafactory, so it might need to expand the production line," Zhang noted, adding the new model could help double Tesla vehicle sales in China.

Last year, Tesla saw a 37.1 percent growth in sales in the Chinese market to reach 439,770 units, data from the China Passenger Car Association (CPCA) showed.

But Musk's goal for global sales goes far beyond the status quo. He wants Tesla to sell 20 million electric cars in 2030. Tesla vehicle deliveries stood at 1.31 million units last year.

To materialize the goal, a new model with higher cost-price performance and ability to be rapidly mass-produced is necessary, and the task may fall on the shoulders of Tesla's Shanghai plant, experts said.

The Gigafactory in Shanghai, the country's first wholly foreign-funded vehicle project, broke ground in early 2019. One year later, Musk attended a ceremony in the factory to mark the first deliveries of made-in-China Tesla vehicles to local buyers.

The Shanghai Gigafactory delivered more than 710,000 EVs in 2022, accounting for half of the firm's global deliveries, and it has become Tesla's main export center in the world.

Automotive batteries, a key component for EVs, could also be a focus that Musk would seek further cooperation with Chinese suppliers.

Musk held discussions with Robin Zeng, the chairman of Chinese EV batteries giant CATL, most possibly on the supply of more batteries to Tesla.

Tesla has been considering the construction of a battery plant in the US in partnership with CATL, according to a Bloomberg report published in March.

Renewable energy

On top of the vehicle business, Musk might tap into Chinese suppliers in the energy sector, as he previously endorsed China's leading position in renewable energy generation.

"Even though this is not on his agenda this time, Musk will show his eagerness in seeking cooperation in this sector someday because it is significant for the firm's sustainable development and we all know Tesla is more than an automaker," a veteran auto expert, who asked to be anonymous, told the Global Times.

"Few seem to realize China is leading the world in renewable energy generation and electric vehicles. Whatever you may think of China, this is simply a fact," Musk said on his twitter account a year ago.

During Tesla's Investor Day event in March, the US executive touted a sustainable energy future, revealing the third part of Tesla's Master Plan in which the company will seek to eliminate fossil fuels and convert the world into sustainable energy.

"If you combine Musk's big goal and China's advantage in the arena, cooperation is only a matter of time," the anonymous expert said. 

Tesla said in April that it would open a factory in Shanghai capable of producing 10,000 Megapack energy-storage products every year to supplement the output of the Megapack factory in California.

Leading EV market

The success of Tesla's Shanghai plant and the company's steady rise in the Chinese market is a testament to China's fast-growing EV sector and its unique advantages as a global manufacturing hub, and this is something transnationals could not miss out on, Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, told the Global Times.

"The country is continuously materializing its pledge in further high-level opening-up," Xiang said.

China always welcomes prominent business figures from all countries, including Musk, to visit China for a deeper understanding of the market and pursuing mutually beneficial cooperation, Mao Ning, a spokesperson for China's Foreign Ministry, told a press conference on Tuesday, in response to a question about Musk's trip.

Data released by China's Ministry of Commerce showed that foreign direct investment (FDI) in the Chinese mainland in actual use, expanded 6.3 percent year-on-year to 1.23 trillion yuan ($175 billion) in 2022. In US dollar terms, the FDI inflow went up 8 percent on a yearly basis to $189.2 billion.

"The stellar performance of Tesla in the Chinese market shows that solid trade and economic cooperation between China and the US is now an irreversible trend," Ma Jihua, a veteran technology expert, told the Global Times.

It is another reminder that US businesses will not blindly follow their politicians' calls to decouple from the world's second-largest economy, Ma said.