Tesla “Steps Up” Engagement With Chinese Regulators Amidst Growing Scrutiny

If you’ve been following the Tesla saga for the last several months, there’s no doubt your attention has likely turned to the relationship between the company, its “founder” Elon Musk and the Chinese Government.

Over the last couple of months, we have observed how the honeymoon between the world’s largest auto market and Tesla have slowly but surely soured. The change in the relationship is notable because Tesla has been heavily reliant on sales to China and production from its Shanghai factory to make analyst estimates.

Now, it appears that Tesla is getting the message and trying to play “damage control”, ostensibly before the the soured relationship becomes obvious enough for even the most unsophisticated Tesla investors (all of them?), which would likely cause a run on the proverbial bank. 

In response, the company is “boosting its engagement” with Chinese regulators, according to a Reuters report Monday morning. A follow up by Bloomberg reported that “Tesla executives attended at least four policy discussions in China, on topics including auto data storage, vehicle-to-infrastructure communication technologies, car recycling and carbon emissions”.

Interesting that quality control and braking weren’t on the list.

Tesla also is expanding its “government relationship team” in China (one can’t even imagine what they are tasked with). Recall, recently, Tesla paid back $614 million in loans that it owed on its Shanghai Gigafactory. The company also said in its most recent 10-Q that it no longer had access to $758 million from a fixed asset facility as a result. 

The loans were part of a whirlwind of variables that all mysteriously went Tesla’s way when the automaker sought to get up and running, extremely quickly, in China. Tesla was able to ascertain financing, land and staff to build the Gigafactory with blistering turnaround time when the company made the decision to build in China.

The quick turnarounds and China’s willingness to help finance the project raised numerous eyebrows at the time, including ours. Recall, back in April 2020, we were one of the first to ask if Musk risked becoming a Chinese asset. We raised pointed questions about Musk’s cozy relationship with the Chinese government – before their relationship started to fall apart – more than a year ago. 

Recently we’ve covered the China risk to Tesla’s business in our piece suggesting that Elon Musk’s Chinese fairy tale could eventually come to an end. We noted how in late April 2021, Chinese state media is now suggesting that the automaker’s sales could be “doomed” in the country.