By on June 4, 2021

Image: Tesla

What does the future hold for Tesla in China? Expansion, or exports?

That’s the question being asked by an Automotive News story today.

Earlier this year, the outlook for Tesla in China looked rosy. But net orders for cars have fallen by nearly half this quarter amid concerns about the company’s vehicle safety, along with how it collects and stores data, and at least one report suggests that the company could end up exporting cars produced in China to Europe.

Not long ago, analysts were predicting expansion for Tesla in China. One analyst mentioned that in addition to planned plants in Texas and Berlin, Tesla could build another factory in China.

China’s Passenger Car Association will release May’s sales data next week. Sales dropped more than 25 percent from March to April, with more than half of the over 25,000 cars produced in China being exported.

Tesla stock did rise a bit in Friday’s early trading after a slight fall on Thursday, though the stock is down 35 percent from its peak in January.

For reference, China is the second-biggest market for Tesla, following the U.S. It builds Model 3 and Model Y vehicles in Shanghai.

Like the analysts, we too are curious about what happens. Tesla appears to be at a crossroads in China — if expansion was in the cards, it would obviously be great news for Elon Musk and company. Not just because growth is generally good, but because China is obviously a huge market. The country’s EV market is arguably more competitive than here, thanks to the presence of both several startups and more traditional automakers like BYD that build EVs, with roughly 20 makes in play, but Tesla shipped a half-million units there in 2020.

Obviously, the company would prefer to sell Chinese-made Teslas in China instead of shipping them to other markets. But the company has been dealing with a series of headaches for quite some time now. Between concerns about reliability here in the States and the ability of Teslas equipped with autonomous-driving software to perform those functions in a safe manner, and concerns about data, Tesla has enough headaches to make Musk want to take some time off to host a comedy show. Oh, wait.

All this would seem to confirm earlier reports that we highlighted regarding canceled expansion plans at the Shanghai plant.

At the moment, it sure looks like contraction, rather than expansion, is the name of Tesla’s China game.

[Image: Tesla]

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30 Comments on “Will Tesla Expand in China, Or Head the Export Route?...”


  • avatar
    redapple

    Used to dislike Tesla.
    Been to the plants.
    Sold them machinery.
    The Purchasing guys and MFG ENG guys i dealt with did not impress me.

    They got even with me. I bought TSLA at $720/share last month.

    • 0 avatar
      Luke42

      I bet you bought your stock from me when I sold it around that time.

      Selling that stock is how I can afford a Tesla now. Thank you!

    • 0 avatar
      ToolGuy

      While Tesla continues its slide into dissolution, Ford continues to dominate and expand around the globe.

      Here is a relatively interesting* article detailing exactly how Ford will hammer Tesla into irrelevance [Bonus: Jim Farley discovers Frunk. Totally.]:
      https://www.theverge.com/2021/5/20/22444294/ford-f150-lightning-pickup-truck-jim-farley-interview

      *Not Tim Healey’s TTAC Throws Automotive News Article At The Wall level interesting, but relatively interesting nonetheless.

      Sample quote:
      “You know, we’ve been in markets and products that have never been profitable and don’t have a sustainable view to profitability.”
      (This quote is attributed to a Ford CEO describing Ford Motor Company, but any TTAC reader can tell that it *really* refers to Tesla.)

      • 0 avatar
        Luke42

        Tesla is not sliding into disillusion.

        Their stock price is being corrected. Their sales are on par with Mazda (and growing quickly), but their market cap is several times that of any of the Global Big 3 (and shrinking).

        Even with a very bright future priced into their stock, Tesla’s stock price should be less than $85/share (giving it a market cap less than GM). Clearly, Tesla’s stock price has more to do with Tesla fandom than it does with Tesla’s future earnings.

        But, as a Tesla fan, I’m OK with other people overvaluing TSLA stock. Having an overvalued stock means that Tesla can get capital from their fans/stockholders whenever they’re ready to build a new factory or develop a new platform. The social purpose of the stock market is to allow people to fund the expansion of businesses in exchange for a share of the future profits (meaning IPOs and FPOs). So, if Tesla can build factories and build their business — that’s a good thing. I’m not going to talk anyone else out of overvaluing TSLA stock. [shrug]

        A rapidly growing company with nearly limitless access to capital from their fans isn’t going to dissolve any time soon — even if their stock falls from $600 to $60.

        • 0 avatar
          TS020

          Their biggest threat that they likely don’t see is their own hubris; competitors are bringing out some quite compelling offerings while Tesla seems to be resting on their earlier successes and relying on people who care about dick waving their 0-60 times, which is a minority of the population. Cybertruck is nowhere to be seen, roadster is nowhere to be seen, the semi is nowhere to be seen. It’s like the Japanese imports back in the 70’s all over again.

          • 0 avatar
            mcs

            @TS020: ” Tesla seems to be resting on their earlier successes”

            Are you serious?? They just announced another 6 million dollar investment into a battery lab. Lots of spy photos of the new Model S with the active aero and rumors about it grabbing production 1/4 mile records. Photos of it testing on the Nurburgring. Building two new plants with photos of the aluminum castings for new versions of the Y. Lots of drone footage of the factory that will be building the Cybertruck including photos of the arrival of the IDRA machines that will produce it. Drone footage of the factory starting to be build that will make the 4680 cells for the semi and cybertruck. Reports from early semi customers like Frito-Lay of the arrival and installation of the mega-chargers they ordered for their Semis. Photos of production versions of the semi. Oh, and 0-60 times? That’s an important indicator on how the car is going to accelerate in everyday traffic and freeway merging. And the fact that there are reports and photos of an active aero-equipped Model S Plaid breaking Laguna Seca track records is an indicator that they are capable of more than just 0-60 times. What about the Time Attack wins by the Tesla-supported tuner Unplugged Performance in their Model 3? Sounds like more than 0-60 times to me. Resting on their earlier successes. Give me a break.

      • 0 avatar
        ToolGuy

        Closing facilities (ex. Tilburg), cancelling models (ex. Plaid+), TSLA is definitely near collapse. [Tim Healey was right (and so was Bob Lutz).]

        Read the Farley interview. “I have nothing but respect for Tesla” = a nice thing for the CEO of Ford Motor Company to say while watching the competition crumble – because *no* company can compete with a modernized Ford [“Like, all the doors open, you can hear the celestial humming, and people get really, deadly serious about a perfect product.”]

        • 0 avatar
          mcs

          “Closing facilities (ex. Tilburg), cancelling models (ex. Plaid+), ”

          Yeah, while opening newer larger facilities like Berlin and Austin. Kind of left that part out huh.

          • 0 avatar
            ToolGuy

            Clearly you have not completed the assigned reading. (Elon Musk clearly has, and he is giving up as any rational person would.)

        • 0 avatar
          mcs

          Also, if they were build a new plant in Europe, why would they not plan for it to take over Tilburgs production? The cost and work to retool tillburg for the new models would be prohibitive anyway. Those machines for the giant castings aren’t cheap and we’ve already seen from videos from the texas construction the need for isolation foundations to be built and gantry cranes to be installed. It makes no sense to retool Tilburg.

  • avatar
    mcs

    “But net orders for cars have fallen by nearly half this quarter”

    Has Tesla confirmed that? The report was from an online publication that supposedly had inside information. This was not information released by the company, but you treat it like it’s fact. Do I think it’s true? Actually, I wouldn’t be surprised it if was. But, until it’s confirmed, you can’t treat it as a fact. If anything, the casualty from this will probably be the rumored India plant. Again, I do think the rumor about the China sales drop (and that’s what it is at this point as far as I know) is probably true. I just don’t see why it’s a surprise. We’ve seen it coming.

  • avatar
    SCE to AUX

    Q: Will Tesla Expand in China, Or Head the Export Route?
    A: Even Tesla doesn’t know.

    • 0 avatar

      Thank you SCE to AUX, you saved me time.

    • 0 avatar
      Luke42

      Agreed.

      Tesla figures things out just-in-time, and publicly announces their stretch goals.

      One of the features of the Silicon Valley business-culture that they employ is to respond quickly when the market changes. In other words, TSLA’s will do whatever they have to do to sell cars.

      They likely don’t know if that means selling them into the Chinese market, or exploring them — and they probably won’t know until the moment it happens.

      Love it or leave it, that’s just how that business culture works.

  • avatar
    indi500fan

    It’s interesting that the ChiComs have intimidated Musk into recalling cars for faults that Tesla blows off elsewhere in the world.

    • 0 avatar
      Luke42

      “Chicoms”, LOL.

      The Chinese folks in China that I deal with are hard-core business people.

      They live pretty much the same lifestyle that Americans with engineering degrees and business habits do, though they do it in a very Chinese way.

      It’s not 1953 anymore.

      Communism (by the textbook definition) started being phased out in 1978: https://www.npr.org/sections/money/2018/02/07/583999476/episode-337-the-secret-document-that-transformed-china

      (Listen to the audio — the text is just the abstract.)

      China retains the communist moniker, but my Chinese colleagues are making money by selling goods and services — just like I do here in the United States.

  • avatar
    Oberkanone

    Thailand. Rayong area is location for next TESLA manufacturing.
    That is my speculation.

  • avatar
    Kendahl

    For some time, Teslas have been coming to the United Kingdom from China instead of California. There are several YouTube videos comparing quality of cars from the two different sources. Chinese and California cars also come with different battery technologies.

    • 0 avatar

      Let me make a guess: Chinese made Teslas were of higher quality than one’s made in the failed state of Kalifornia.

    • 0 avatar
      mcs

      @kendahl: I think it’s just the entry level Models that come with the Li-Fe lithium iron batteries. Hopefully the Texas cars are as good or better than the Chinese cars. It’s weird saying that. I also expect Texas and Berlin to get rid of the production pressure on Fremont. Hopefully they can slow the lines down a bit on all of the plants. Texas will be a gradual ramp-up. They’re already producing front castings for the Model Y. Full vehicle production is set for the fall, but they’ll probably keep ramping up parts production until then

    • 0 avatar
      Luke42

      LiFePo4 batteries (like those used in the Chinese Teslas) have great longevity+durability+safety, but they they’re heavier and have shorter range regular lithium batteries.

      For customers who don’t do American-style road trips, LiFePo4 batteries are a great choice. They’ll likely last many years longer than the long-range batteries we require here in the United States.

      • 0 avatar
        mcs

        It might be interesting to see what improvements we get in LiFePo4 with some of the 4680 technologies like tabless. LiFe tops out at 160Wh/kg now and I wonder if it could be pushed to the low 200’s maybe. I think Sodium-Ion could be pushed into the 200’s as well and that’s an even better technology. I think if we can get these other technologies to the upper 200’s with today’s Lithium-ions and a range in the 300’s, it would be a good combination for low-end EVs. In fact, my current bet for vehicle technology for the 2030’s is solid-state sodium-ion.

        https://ucsdnews.ucsd.edu/pressrelease/new-material-is-next-step-toward-stable-high-voltage-long-life-solid-state-sodium-ion-batteries

        • 0 avatar
          Luke42

          One of my favorite unfounded hypotheses is that the single and dual motor Cybertruck will use LiFePo4 4680s, and the tri-motor will use the high-nickel 4680s.

          Perhaps the battery might weigh the same for both short and long-range variants.

          I have absolutely no evidence to support this, I just happen to like the idea.

        • 0 avatar
          Luke42

          One of my favorite unfounded hypotheses is that the single and dual motor Cybertruck will use LiFePo4 4680s, and the tri-motor will use the high-nickel 4680s.

          Perhaps the battery might weigh the same for both short and long-range variants.

          I have absolutely no evidence to support this, I just happen to like the idea.

          • 0 avatar
            mcs

            @luke: Yeah, I kind of like that idea too. No nickel, so it’s cheaper. The 4680 tabless and the other technology should push the gravimetric density up. Nickel availability and cost favor your theory.

  • avatar
    slavuta

    I think something is brewing in China because Musk is now looking for Russia
    https://www.cnn.com/2021/05/21/business/elon-musk-tesla-russia/index.html

    • 0 avatar
      Luke42

      Gotta build the vehicles close enough to the customers that currency fluctuations, and tweets from incompetent world leaders don’t wreck your business.

      Trump and his fans never understood that international trade is a 2-way street, and their actions to restrict imports also restricted exports. Trump’s policies encouraged business to move production overseas to deal with the uncertainty and trade barriers in some cases. Tesla doesn’t want their business destroyed by trade barriers, so it makes sense to place factories around the world just-in-case

      Increasing American manufacturing is much more complex than raising taxes on imports and being rude on Twitter. Of course, people like me told all y’all that years ago. We were right.

      Businesses are gonna do whatever they have to do to guard against the risks presented by a return of the policies of the previous administration, and/or by similar political movements worldwide.

      • 0 avatar
        slavuta

        And I love this model. I always said that American company mast make in the US what they sell in US. If they want to make something outside US – make it anywhere you want. Perfect.

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