In 2018, Tesla made the grave mistake of building a factory in Shanghai. Although this investment made the giant company the largest foreign-invested manufacturing project in Shanghai, with the Chinese Communist Party (CCP) providing many additional benefits like tax incentives, Tesla has now become a target of CCP oppression.
China’s CCP-controlled media platforms such as XinHua Agency and Weibo have continuously attacked Tesla with negative news, including brake failure and rumours of the technology giant’s theft of customer’s personal information. In some areas of China, Tesla vehicles are no longer permitted to enter highways, and some Chinese insurance companies now refuse to cover Tesla vehicles. These problems are undoubtedly a big blow for the Californian company.
So, what is the reason for the CCP’s sudden change in attitude?
Following Tesla’s approval to enter the Chinese market, the CCP required Tesla to annually disclose a certain percentage of technical and design drawings. Tesla’s founder, Elon Musk, not only agreed to this condition, but also disclosed all Tesla’s technology and design.
However, despite this treasure trove of information, the CCP still fails to successfully build an electric vehicle on par with Tesla’s standards. The CCP version’s power consumption and output power are less than two-thirds of Tesla’s, and sensors and other accessories in key parts can only be imported. Hence, the cost of the final product ends up higher than that of Tesla.
Furthermore, Tesla is not just an electric car, but a hybrid between vehicle and computer. This artificial intelligence requires highly sophisticated automotive chips. However, the CCP currently lacks the ability to master such technology
Tesla’s two recent successive price cuts have also impacted China’s local electric vehicle sales. The cheapest Tesla car sells for less than 200,000 yuan, and the license plate can be directly registered, which resulted in a greater Chinese market demand for Tesla.
To maintain their monopoly over the Chinese domestic market, the CCP switched from a pro-Tesla stance to suppressing Tesla.
This move also shows China’s market is not a free market. All enterprises, market rules, and public opinion guidance are manipulated by the CCP.
Unfortunately, Tesla’s entanglement with the CCP means the company cannot withdraw easily from the Chinese market. After all, in 2019, Tesla disclosed a 50-year operating lease agreement with Shanghai. This agreement stipulates Tesla will invest 14.08 billion in its Shanghai branch over the next five years.
At the end of 2023, Tesla’s annual tax will be 2.23 billion yuan. If the equipment investment and tax payment fail to meet the conditions, Shanghai can request Tesla to return its factory land, while Tesla can obtain compensation for the residual value of the plant and production equipment from Shanghai. Such a risky agreement makes it difficult for Tesla to immediately cut business ties with the CCP.
Tesla is not the only company facing this dilemma. All companies associated with the CCP will encounter the same issue sooner or later. These companies’ temporary gain from business with the communist regime, and their disregard of the dangers of business with the CCP, comes with a painful price.
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