Tesla’s Elon Musk thanks Chinese government ahead of expected approval for Shanghai factory

Tesla’s celebrity chief executive Elon Musk expressed his appreciation to the Chinese government in an earnings call on Wednesday, foreshadowing a future announcement on the location of its first factory outside the US.

The American electric car giant is having a “good discussion” with the authorities and is close to announcing details of a so-called Gigafactory in China – a Tesla facility that produces lithium ion batteries – which would later expand into vehicle production. 

“We’re very appreciative of the fact that the government of China has announced that they will be allowing full ownership of manufacturing facilities in China,” Musk said during the call.

The comments came after Beijing announced it would scrap foreign ownership limits on local electric car firms starting from this year, paving the way for Tesla to set up a wholly owned car assembly plant in China. Earlier this year, Twitter posts by Musk decrying China’s unfair automotive trade practices caught the attention of US President Donald Trump. 

Will Tesla face the same fate in China as Uber and Amazon in local rivals’ home turf?

“An American car going to China pays 25 per cent import duty, but a Chinese car coming to the US only pays 2.5 per cent,” the billionaire entrepreneur tweeted in a reply to a Trump post in March about the trade deficit. “Also, no US auto company is allowed to own even 50 per cent of their own factory in China.” 

“It’s like competing in an Olympic race wearing lead shoes,” Musk tweeted. “Just want a fair outcome, ideally where tariffs or rules are equally moderate … Hope this does not seem unreasonable.”

The frustration hinted at Tesla’s reported struggle over striking a deal with the Shanghai government on setting up a fully owned plant.

In response to a promise to open up the auto sector made by Chinese President Xi Jinping at the Boao Forum in Hainan last month, state planner, the National Development and Reform Commission (NDRC), announced it would scrap limits on foreign firms owning domestic auto entities by 2022.

China lays out plan for opening auto industry, clearing the way for Tesla’s wholly owned plant

China is the world’s biggest market for electric vehicles and Tesla’s second largest after the US. Its revenue in the country doubled last year to US$2.03 billion, accounting for about 17 per cent of the total, according to the company’s annual report.

“We will have a lot more to say [about China] in the future,” Musk noted on the call. The company saw first quarter revenues reach a record US$3.4 billion although losses for the January-March period were nearly US$785 million.