Are Tesla's Sudden China Woes A Harbinger Of Things To Come?
Authored by Fan Yu via The Epoch Times,  To see the impact Chinas fickle market can do to a companys value, look no further than Tesla. On April 20, the Chinese Communist Party (CCP)s media and regulators began a series of public rebukes against the California-based electric carmaker. The criticisms were broad, ranging from Teslas car safety, to data gathering practices, as well as customer service. In early June, technology website The Information reported that Teslas May China orders fell by nearly half compared to April, according to internal data. Orders fell from 18,000 in April to 9,800 in May, a reflection that Chinese consumers were negatively impacted by the uproar. And all of this has erased $137 billion in market value as Teslas stock price declined 19.5 percent since April 21. A Series of Unfortunate Events  Tesla has encountered issues all year in China. In February and March, the CCP banned Tesla from its military compounds and housing units on concerns that the company could collect information via the cameras attached to Tesla cars to facilitate spying on behalf of the United States. In early April, Teslas communications and governmental affairs director in China announced that any data collected within China would be stored in China and will not be sent to the United States, in an effort to quell CCP security concerns. This came about after founder and CEO Elon Musk publicly declared that Tesla would not engage in spying. On April 20, CCP mouthpiece Xinhua published an article from the sidelines of the Shanghai Auto Show slamming the electric vehicle maker on the quality of its vehicles, citing consumer complaints. On the same day, an official post on WeChat from the account of the powerful Commission for Political and Legal Affairs also drew attention to the Auto Show, when a woman climbed onto the roof of a Tesla vehicle to complain about her cars faulty brakes. The video of the woman went viral on Chinese social media. While its unclear why the CCP organ which oversees the countrys police and court system would weigh in on electric cars, it was nonetheless a powerful rebuke of Tesla. While Tesla China originally pushed back against this narrative, stating that the woman in question has been protesting against Tesla for some time, later during the same week the company issued a public apology and promised to better listen to customer complaints. SpaceX owner and Tesla CEO Elon Musk speaks during a conversation with legendary game designer Todd Howard (not pictured) at the E3 gaming convention in Los Angeles, Calif., on June 13, 2019. (Mike Blake/Reuters)  A Sudden About Face  The CCPs pushback against Tesla has been sudden and drastic, directly impacting the carmakers sales slump in May. By all accounts, Tesla had a blowout first quarter of 2021. The company reported a 74 percent increase in sales year over year, and its non-GAAP net income eclipsed $1 billion for the first time in its history. Its gigafactory in Shanghai was humming, which elicited speculation that Musk was ready to build a second assembly plant in the worlds fastest-growing car market. Teslas stock price was sky high, while Musks rock star status was beyond reproach. Analysts are now concerned. Credit Suisses Dan Levy wrote on June 2 that in May Teslas had its lowest monthly sales in a year. The trajectory is unclearwhile some expect the concern to be temporary, weve also heard the view that it may take time for Tesla volume to recover, Levy wrote in a note to clients, while also raising the possibility that Tesla can export to Europe the extra cars it makes in China. Its China issues are on top of existing business challenges facing Tesla: microchip shortages, competition from legacy automakers, falling bitcoin prices, and the specter of higher corporate tax rates. This sudden turn of events in China is surprising. Tesla was in as ideal a position as any foreign company could hope for. Until suddenly, it wasnt. The company had gone all-in in China. Besides the companys gigafactory, Tesla China has become a real hub for the company, with its own R&D plant and local technical staff. Morgan Stanley analysts recently noted that Tesla posted job requisitions in Beijing and Shanghai for engineers with data center expertise, suggesting Teslas seriousness in keeping Chinese data local. Morgan Stanley analyst Adam Jonas wrote on May 27 that Tesla could potentially create a Tesla China entity that could largely be operated autonomously and independently from the U.S. parent.  Musk, for his part, had been saying all the right things in praising Beijing and Chinas future as the worlds leading electric vehicle market. In a January article, Bloomberg even declared its fair to wonder if Musk has become [Chinese leader] Xis favorite foreign capitalist.  It remains to be seen how Tesla plans to turn around its public opinion in China. The China market is Teslas second-largest revenue contributor after the United States. If the CCPand Chinese consumerscontinue to shun Tesla, its stock price will decline further. One thing is certain: Even the best-laid plans in China could go awry.