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Welcome to China, Elon. Let's talk about how it will work.
In the midst of a brewing trade war, Tesla Inc. emerged as a clear victim. On Tuesday, General Manager Elon Musk reached an agreement with the Shanghai government to open Tesla's first factory outside the United States, with an ability to build 500,000 cars a year. The size of the investment was not disclosed, any more than the terms of the arrangement. In a briefing on Wednesday, a Shanghai government official said any technology sharing with Tesla would be "subject to negotiation" in response to a question from Bloomberg News.
Access to China is a panacea for the automaker but Musk enters with a weakened position. On Tuesday, Tesla also signed an investment agreement in an electric vehicle with the Shanghai Lingang Management Committee, the Lingang Area Development Administration and the Lingang Group. A development and innovation center will also be set up. In theory, it is there that a technology transfer could take place, even in the absence of a joint venture
which would go against the fact that it was not possible to do so. purpose of a wholly owned company. Here again, it is the art of Trump. Why keep Tesla's feet on fire when the Chinese government can?
The Shanghai government also suggested that it could raise capital and help Tesla with the construction of its plant to make it work as quickly as possible. Estimates for a Model 3 production line are between $ 3 billion and $ 5 billion. At its current burn rate, Tesla does not have this type of capital at its disposal immediately. A spokesman for Tesla said the construction should begin soon, " after getting all necessary permits and permits." It would be another two years before the cars started to come out of the chain and two to three others
But the big promises in China have a price. At the National People's Congress earlier this year, Prime Minister Li Keqiang reassured the world that there would be no compulsory technology transfers in the manufacturing sector. S harangue the know-how as a counterpart has long been a bone of contention for foreign companies operating in joint ventures, a vital means of obtaining international funds in the country.
Up, Up and Away
Monthly Unit Sales of New Energy Vehicles in China Increased
Source: CEIC
In a working paper of the National Bureau of Economic Research published earlier this year, economists examined data between 1998 and 2007 and concluded that Chinese policy advocated technology transfers foreign investors in domestic operations "was successful.He found that there were several ways to do this.For example, when the share of sales of a joint venture rose by 10 percentage points, other industry companies were also 10% more productive.
For Tesla, who has always extolled the virtues of his own technology, poses a great deal Beijing has defended the cause of new energy vehicles and has supported the sector with policies and subsidies to make China the largest market for electric cars yet it has not produced t Tesla is perhaps a practical solution
This review does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners
To contact the editor responsible for this story:
Katrina Nicholas at [email protected]
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