Elon Musk needs to learn Jack Ma lessons in China

Tesla founder Elon Musk could see his surging net worth go into reverse if he encounters more serious problems with Chinese authorities

 Elon Musk needs to learn Jack Ma lessons in China
Elon Musk needs to decide whether discretion and deference are virtues worth cultivating with Chinese authorities to keep Tesla in a leadership position in the world's biggest market for electric vehicle sales. File photo: Reuters.

(ATF) Tesla founder and ‘technoking’ Elon Musk won stock options worth over $30 billion after the firm said on Friday April 30 that it hit targets for his compensation. However, the example of Jack Ma shows that conflict with Chinese authorities could escalate to a level that puts Tesla’s value and Musk’s net worth in reverse.

China on Thursday April 29 published draft regulations that would require information from smart cars such as as the electric vehicles (EVs) produced by Tesla to be stored in the country.

The move follows steps in March to ban Tesla vehicles from Chinese military locations over concern about data collected by cameras and sensors.

Tesla was quick to state that it abides by all local regulations and will keep Chinese data in China.

But the latest regulatory move and growing criticism of the firm on Chinese social and state media is leading to speculation that authorities may be interested in slowing Tesla’s sales growth in order to help local firms to win share in what remains the world’s biggest EV market.

In Tesla’s first quarter earnings release last week it attributed record results to Chinese demand for its electric vehicles, the sale of emissions credits to other firms and a boost from offloading some of its bitcoin holdings.

The market for regulatory credits is likely to diminish in importance and bitcoin trading is a highly uncertain source of future revenue, so sales in China will remain the single most important growth lever for Tesla in the near term.

That makes avoidance of open conflict with local authorities vitally important.

Elon Musk does not have personal risk exposure comparable to that of Jack Ma, who is a Chinese citizen and resident in the country. But the way Chinese authorities reacted to a perceived threat from Ma by cancelling the planned IPO of Ant Group last year, then tightening regulation that affects his business interests was a warning that escalation of any disputes can have a dramatic effect.

Jack Ma lost his status as the richest person in China in the aftermath of the clampdown by Chinese authorities and Musk’s current ranking as the third richest person in the world is entirely dependent on Tesla’s stock price.

Berlin factory delayed

Tesla is not just reliant on Chinese sales, it will also need a benign regulatory backdrop for its plans to increase production in the country at its Shanghai plant.

On Sunday May 2, a German news organisation reported that Tesla’s planned Berlin factory will be delayed by six months or more.

Musk has given his German team six more months to start production at its delayed factory near Berlin, its first gigafactory in Europe, German weekly Automobilwoche reported.

Tesla had originally intended to start production on July 1, but red tape and plans to also build a battery cell factory on the site have delayed the project.

Tesla complained about the regulatory process in Europe's largest economy, saying its approval framework "directly contradicts the urgency to plan and realise such projects that is necessary to battle climate change”.

That approach does not seem to be helping much in Germany, and it could certainly backfire in China.

Tesla has a public representative in China - Grace Tao, a former anchor on state broadcaster CCTV who is now Tesla’s local vice president for external relations.

But Elon Musk’s twitter account remains the main source of market moving information for Tesla, so there is always a risk that his public comments will undercut attempts to communicate calming messages by his subordinates.

His only tweet on Sunday May 2 was the comment: “I love art deco”, which was, of course, uncontroversial. But he has made controversial remarks on Twitter before, as evidenced by his comments about an English diver who took part in the dramatic cave rescue in northern Thailand in July 2018. That episode ended in a defamation case in an LA court, which Musk won, late the following year.

Musk is due to make an appearance as guest host on the US tv show Saturday Night Live on May 8, however, so his deputies in China will no doubt be hoping that there is no content in that appearance that sparks a reaction from Chinese consumers or state media.

Owners of Tesla stock all around the world will also be aware that Musk’s relations with Chinese authorities could have an impact on their own net worth - as well as his own.


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