Elon Musk's close ties with Trump might pose a challenge for Tesla in its second-largest market.
In the world of business and politics, Elon Musk finds himself in a unique position. Rather than his Midas touch drawing investors, it's his closeness to both the U.S. President Donald Trump and his role as head of the Department of Government Efficiency (DOGE) that has caught the attention of dealmakers. This is especially true as relations between the U.S. and China continue to heat up.
While the U.S. and China are squaring off, Musk stands as an unusual figure. He's seen as being on good terms with both governments, which has some people in China hoping he'll act as a bridge between the two cultures. However, this newfound Washington bona fide could prove to be a double-edged sword for Musk and his company, Tesla.
On one hand, Tesla's hugely anticipated launch of its "full self-driving" (FSD) technology in China - its second biggest market – could provide a significant revenue boost. But, the Chinese government may be using Tesla's FSD approval as a bargaining tool in trade negotiations with the U.S. This delay in approval could put a major project Musk has been lobbying for on hold, impacting Tesla's position in the ultra-competitive Chinese market.
There are plenty of other potential violations Tesla could be accused of in China as well, according to Isaac Stone Fish, CEO at Strategy Risks, a business intelligence firm. Rolling out FSD in China is significant, as it could help Tesla gain a substantial foothold in the market, which has been fiercely competitive with a brutal price war.
As Tesla faces increasing pressure from Chinese competitors like BYD, which offers advanced driver assistance systems free of charge, Tesla appears to be responding with its own updates. On Tuesday, Tesla introduced a long-awaited update to its Autopilot software, allowing some drivers to add a city-driving navigation feature. However, this new feature falls short of the latest version in the U.S.
While Musk and Tesla are well-liked in China, getting Trump's China policy to shift might not be as simple as some think. Despite Trump's campaign promises, he hasn't implemented the promised 60% tariffs on China as of yet. Furthermore, Trump's economic team takes a hardline stance on economic relations with China, which might limit Musk's ability to influence policy.
Still, don't underestimate Musk's influence. Tesla grew rapidly in the massive Chinese car market since 2014, building a Gigafactory in Shanghai within 10 months – an anomaly at the time and at a lower cost than in the U.S. Plus, Tesla's Megapack factory, which produces large batteries, just began production this month.
Musk's connection to both governments could be both a gift and a curse as Tesla continues to try and make inroads in China's highly competitive market. Only time will tell if his close ties end up helping or hurting his company's growth in China.
- Elon Musk's tech company, Tesla, is exploring the possibility of introducing its 'full self-driving' technology in China, a move that could potentially be leveraged by the Chinese government as a bargaining chip in trade negotiations with the U.S.
- The administrative body overseeing business in China, known as the 'institutional' sector, may view Tesla's presence in the nation as a significant opportunity, given Musk's close relationship with both U.S. and Chinese governments.
- With Tesla's 'Autopilot' software receiving an update to enable city-driving navigation, Musk is facing both opportunities and risks, as China's 'yuan' economy and its tech sector, including competitors like BYD, pose potential challenges to Tesla's expansion in the region.
