The Chinese authorities appear set to approve full self-driving (FSD) software for Tesla electric vehicles, but the decision may not be the boon Tesla CEO and billionaire entrepreneur Elon Musk is hoping for.
Mr. Musk visited China over the weekend, and Tesla stock jumped on Monday on news that the Chinese authorities have tentatively approved the deployment of FSD technology for Tesla cars throughout the country.
Despite the news, Dr. Gabriel Scheinmann remains skeptical that the FSD approval will improve Tesla’s long-term prospects.
Mr. Scheinmann, a foreign policy analyst and executive director of the Alexander Hamilton Society (AHS), surmised Mr. Musk is likely to see the approval of FSD technology in China as a “crucial” development after Tesla reported declining sales and missed earnings earlier this month.
Still, Mr. Scheinmann told NTD’s “China in Focus” that other American companies that have hoped to make headway in the Chinese market have risked the loss of their intellectual property and corporate autonomy with little to show for it.
“If Musk succeeds, he will be the exception to a lot of what we’ve seen before,” the foreign policy analyst said.
Mr. Scheinmann said American companies are typically attracted to China with hopes of lowering production costs and selling their products in a larger market than they typically see at home.
“Every time, what we’ve essentially found is that these companies—and now you have I think more and more testimony from these companies from their past efforts come out—these companies basically say that they’ve been taken advantage of, that they’ve actually lost the proprietary nature of their technology in particular, that they’ve been forced to make a certain number of compromises and business decisions that restrict their own profitability in ways that they never would have had to do so in the United States, or in Western democracies,” Mr. Scheinmann said.
Shares in Tesla Inc. surged in Monday afternoon trading, ending the day up more than 15 percent—its biggest one-day jump since February 2020. For the year to date, Tesa shares are still down 22 percent.
Tesla Issues ‘Intertwined’ With Other Policy Concerns
Mr. Scheinmann noted Mr. Musk’s efforts to keep Tesla in the good graces of Chinese regulators may create a complicated picture for the billionaire’s numerous other business ventures. The foreign policy analyst noted Mr. Musk’s recent opposition to U.S. legislation that would force the TikTok social media app to divest from its Chinese ownership.
Echoing concerns raised by Rep. Thomas Massie (R-Ky.), Mr. Musk argued in a March 12 post on his X social media platform (formerly known as Twitter) that the TikTok divestiture legislation is not just about regulating one platform but about broader censorship and U.S. government control.
Some critics of the TikTok divestiture legislation have raised concerns about how the legislation defines when a social media application may be deemed to be “foreign adversary controlled” and forced to divest from its existing ownership.
The legislation specifies that an application may be forced to divest from its ownership if it’s domiciled, headquartered in, or organized under the domestic laws of China, Russia, Iran, or North Korea or if a company in which a person, entity, or combination of persons or entities in the aforementioned countries have a combined ownership stake of 20 percent or more in said application.
But the legislation also states an application may be forced to divest from its owners if it is deemed to be “subject to the direction or control of a foreign person or entity,” a less clear standard according to some legal analysts.
President Joe Biden had said, in a November 2022 exchange, that Mr. Musk’s purchase of Twitter was “worthy of being looked at” after a reporter asked whether Mr. Musk’s acquisition partnership with foreign business owners raises any U.S. national security concerns.
While Mr. Musk’s may be concerned about the impacts of the TikTok divestiture legislation on free speech and on X’s continued operations, Mr. Scheinmann said the Tesla and X owner may have more complicated motives.
Before acquiring Twitter, Mr. Musk had criticized the platform’s content moderation and presented his efforts to win control of the application as a win for free speech activism. Still, Mr. Scheinmann argued Mr. Musk might have benefitted from knocking out a competing social media platform, if X was his only business to consider.
“It actually may have been directly against his own business interests when it comes to X or Twitter to do this, but I suspect that because of the businesses are interlinked, that if he had supported the bill, it could have a negative consequence of his business for Tesla,” Mr. Scheinmann said.
Mr. Scheinmann noted Mr. Musk’s other business ventures, including SpaceX, which has contracts with the U.S. government and the military, and predicted Mr. Musk may have to increasingly weigh which businesses and principals he will uphold and which he will compromise.
“I think part of the problem that we have here is that a lot of these things are intertwined,” he added.
Tesla’s BYD Problem
Another challenge Mr. Musk and Tesla may have to contend with is the rise of competitively-priced Chinese competitors. Mr. Musk and other U.S. EV makers have expressed consternation at the thought of Chinese alternatives becoming readily available in the U.S. market.
“Our observation is generally that the Chinese car companies are the most competitive car companies in the world, so I think they will have significant success outside of China, depending on what kind of tariffs or trade barriers are established,” Mr. Musk said during Teslas’s January earnings call. “Frankly, I think if there are not trade barriers established, they will pretty much demolish most other car companies in the world, so they’re extremely good.”
Carlos Tavares, the CEO of Stellantis N.V.—a Chrysler subsidiary—said in an interview with Bloomberg in February that the potential entry of low-cost Chinese EVs in the international market, combined with efforts to phase out traditional internal combustion engine vehicles will pose “an existential problem” to automakers that haven’t yet developed competitively priced EV options.
One Chinese EV maker, known as “Build Your Dreams” or BYD, markets an electric vehicle, known as the Seagull, for around $11,000. By comparison, Tesla’s current cheapest offering, the Model 3 sedan, has a base price of around $39,000.
“The EV market in the United States, I don’t wanna say it’s been struggling, but it’s certainly been lower to where expectations thought it would be, which is why you see this price-cutting war that has emerged amongst the American electric vehicle companies, Tesla included,” Mr. Scheinmann said.
U.S. tariffs may still help domestic EV makers compete with Chinese offerings, but Mr. Scheinmann said BYD and other Chinese EV makers may soon overcome those trade barriers by setting up production facilities in Mexico. The 2018 United States–Mexico–Canada Agreement (USMCA) lowers but doesn’t entirely eliminate tariffs between the participant countries.
“I do think we’re approaching a point where the United States needs to face a decision as to whether it is solely concerned about national security-related fields and investments and industries, which I’m not sure the electric vehicle market alone is, or whether it’s concerned is more about economic issues, which is that if China were to be able to dominate the American market, let alone the global market, on electric vehicles, what would happen to American industry?”
The Associated Press contributed to this article.
