While Tesla’s domestic market continued to be its most significant market, the company also targeted the growing Chinese and European markets. China’s rising middle class who preferred EVs to traditional combustion vehicles and the government’s push for cleaner technologies to help combat chronic air pollution, had led to the growth of the EV industry in the country. In China, domestic automakers such as NIO, BYD Auto, SAIC Motor, Geely Auto Group, and Beijing Electric Vehicle Co., were the main players, supported by government subsidies that China had introduced in 2010 to promote EV sales in the country and shift consumers away from internal combustion (fossil fuel-driven) vehicles. The government highlighted EVs as one of 10 commercial sectors central to its “Made in China 2025”, a state-led industrial policy initiative to boost advanced industrial technology...

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ENTRY AND EXPANSION IN CHINA

Tesla opened its first store in China in 2013, but delivered its first vehicles to customers in April 2014. Tesla roped in Kingston Chang (Chang) from luxury automaker Bentley as its China chief in March 2013. Though Chang wanted to expand Tesla’s operations, including customer service centers, PR, and car-charging networks, he was told to focus instead on first building a sales team. He was able to open just one showroom in Beijing before Veronica Wu (Wu), a former Apple China executive, replaced him in March 2014. ..

SINO-US TRADE TENSIONS

The Chinese government faced rising resentment in the US and in European countries on its JV trade pattern. These countries were also concerned over the protection of their intellectual property in China. The JV required the automakers to share their profit, potentiality, and technologies with their Chinese partners. Trump accused China of stealing the US “Intellectual Property at a rate of Hundreds of Billions of Dollars a year.” Accusing China of “taking advantage of the United States on Trade, Intellectual Property Theft, and much more,” Trump said, “we must Balance this very.... ...unfair Trading Relationship.” ..

PRESSURE FROM TIT-FOR-TAT TARIFFS

Unlike other foreign automakers such as General Motors, Ford, BMW, and Daimler, Tesla was particularly vulnerable to an increase in tariffs because the company had no manufacturing plant in China. Since 2017, Tesla had been working with the Shanghai government to explore ways to assemble cars in China. To avoid the steep hike in tariffs and to boost the production of some models in China, on July 10, 2018, Tesla signed a deal with Chinese authorities to set up its first overseas assembly – Gigafactory 3 – at Shanghai, with an annual capacity of 500,000 cars. ..

RE-ESCALATION OF TRADE TENSIONS

In February 2019, Tesla rushed to ship as many Model 3 sedans as possible to China before the expiry of the trade agreement in March 2019. “We’re thinking about demand almost zero right now,” Musk said. According to him, getting cars to China before there was a potential rise in tariffs was “really on top of mind.” ..

A BUMPY ROAD

The unrelenting feud between the world’s two largest economies severely affected financial markets, disrupting international trade and weakening prospects for worldwide economic growth. Tesla was one of the many automakers that were severely impacted by the Sino-US trade tensions. Musk was struggling to boost sales and restore investors’ confidence following the attack on Tesla’s second-largest market China...

NOW WHAT?

In mid2019, Tesla started revamping its Asia operations to lay more of a focus on China. It dismantled its Asia Pacific business, which Zhu had headed since 2018, to focus more on Greater China that would cover the mainland as well as Hong Kong, Taiwan, and Macau. Zhu was put in charge of this division. ..

EXHIBITS

Exhibit I: Tesla: Consolidated Balance Sheet (2015-2018)
Exhibit II: Consolidated Statements of Operations of Tesla (2016-2018)
Exhibit III: Top 10 Electric Cars – Worldwide Sales (2018)
Exhibit IV: World’s Top 10 Selling Plug-In Cars (January-May, 2019)
Exhibit V: Tesla’s Consolidated Statements of Operations (2018-2019)
Exhibit VI: Global Plug-in Electric Car Sales (2014-2018)
Exhibit VII: Sales Volume of NEVs in China (January 2018-February 2019)
Exhibit VIII: Market Share of NEV in Total Vehicle Production in China (2010-2022)
Exhibit IX: Tesla’s Sales Revenue by Segments (2017Q3 – 2019Q2)
Exhibit X: Tesla’s Geographic Area-wise Sales Revenue (2014-2018)