A Pivot to China Saved Elon Musk. It Also Binds Him to Beijing.

When Elon Musk unveiled the first Chinese-made Teslas in Shanghai in 2020, he went off script and started dancing. Peeling off his jacket, he flung it across the stage in a partial striptease.

Mr. Musk had reason to celebrate. A few years earlier, with Tesla on the brink of failure, he had bet on China, which offered cheap parts and capable workers — and which needed Tesla as an anchor to jump-start its fledgling electric vehicle industry.

For Chinese leaders, the prize was a Tesla factory on domestic soil. Mr. Musk would build one in Shanghai that would become a flagship, accounting for over half of Tesla’s global deliveries and the bulk of its profits.

Mr. Musk initially seemed to have the upper hand in the relationship, securing concessions from China that were rarely offered to foreign businesspeople. But in a stark shift, Tesla is now increasingly in trouble and losing its edge over Chinese competitors in the very market he helped create. Tesla’s China pivot has also tethered Mr. Musk to Beijing in a way that is drawing scrutiny from U.S. policymakers.

Interviews with former Tesla employees, diplomats and policymakers reveal how Mr. Musk built an unusually symbiotic relationship with Beijing, profiting from the Chinese government’s largess even as he reaped subsidies in the United States.

As Mr. Musk explored building the factory in Shanghai, Chinese leaders agreed to a crucial policy change on national emissions regulations, following lobbying by Tesla that was not previously reported. That change directly benefited Tesla, bringing in an estimated hundreds of millions of dollars in profits as China production took off, The New York Times found.

Mr. Musk also gained unusual access to senior leaders. He worked closely with a top Shanghai official who is now the premier, Li Qiang. The Shanghai factory went up at lightning speed and without a local partner, a first for a foreign auto company in China.

 

Li Qiang, the Chinese premier. Before he became the country’s No. 2 official, he was the top leader in Shanghai as Tesla quickly built its sprawling factory there. Credit...Pool photo by Greg Baker

 

 

And he got the emissions policy. Modeled after a California program that has been a boon for Tesla, the policy awards automakers credits for making clean cars. To lobby for the regulatory change, Tesla teamed up with California environmentalists, who were trying to clean up China’s soupy skies.

China helped make Tesla the most valuable car company in the world. But Tesla’s success there also forced homegrown brands to innovate. China is now churning out cheap but well-made electric cars, as the Chinese leader Xi Jinping aims to transform the country into an “automotive power.” Chinese automakers like BYD and SAIC are pushing into Europe, threatening established carmakers like Volkswagen, Renault and Stellantis. Detroit is also scrambling to keep pace.

“There’s Before Tesla and After Tesla,” said Michael Dunne, an auto consultant and a former General Motors executive in Asia, about the company’s effect on Chinese industry. “Tesla was the rainmaker.”

 

‘Kind of Pro-China’

Mr. Musk is now treading a fine line. He has sounded the alarm about Chinese rivals, even as he remains reliant on the Chinese market and supply chain and repeats Beijing’s geopolitical talking points.

He warned in January that unless the Chinese auto brands were blocked by trade barriers, they would “pretty much demolish most other car companies in the world.” Earlier this month, Tesla’s share price plunged following lagging China sales, causing him to lose the title of richest man in the world.

 

Grace Tao, a Tesla lobbyist, met with people at the Innovation Center for Energy and Transportation, an environmental nonprofit based in Los Angeles and Beijing. The group, also known as iCET, had approached Tesla. They talked about working together on an emissions mandate in the country, according to notes taken by the nonprofit and shared with The Times.

“They needed that to be successful in China,” Feng An, iCET’s executive director, said about Tesla. But Chinese officials were initially skeptical, he added, because the policy would effectively require traditional automakers to subsidize E.V. companies like Tesla.

His group helped plan meetings with Ken Morgan, then a U.S.-based Tesla lobbyist, according to event materials and emails obtained by The Times. In 2015, Mr. Morgan met with officials in three Chinese cities, touting how California’s emissions mandate had helped spur E.V. production. (Ms. Tao and Mr. Morgan, who recently left Tesla, did not respond to questions.)

Local officials were keen to persuade Tesla to build a factory in their cities. That interest could “potentially be leveraged” to promote a mandate, Maya Ben Dror, who worked for iCET at the time, wrote in an email to Mr. Morgan.

 

Another supplier, LK Group, developed enormous casting machines that can make an entire section of a car with Tesla’s help. The company’s founder, Liu Siong Song, told The Times in 2021 that LK planned to supply the machines to six Chinese companies.

That year, he said that he hoped the technology would “help our country’s automotive industry become bigger and stronger,” linking it to Mr. Xi’s “Chinese dream” of national resurgence.

 

Long Hours at Tesla’s Shanghai Plant

Before the Shanghai plant opened, Fremont was Mr. Musk’s principal factory. He sometimes slept on the factory floor to model the intensity he expected of his employees.

In China, workers were accustomed to long workweeks, a fact that Mr. Musk saw as an advantage.

The Shanghai plant’s schedule involves an unusual weekly change in shifts. According to two former employees, workers there pull four straight twelve-hour day shifts, followed by two days of rest, before switching to four twelve-hour night shifts. (Fremont employees typically work seven twelve-hour shifts over two weeks.)