Amid decoupling, the Tesla CEO is one of the few American tech bosses who remain committed to China

On Tuesday, Elon Musk commenced his high-stakes visit to China, marking his first since before the COVID-19 pandemic. In an era of decoupling, the Tesla CEO stands out as one of the very few Silicon Valley tech bosses who remain committed to China.

This commitment isn’t surprising, given the increasingly pivotal role China plays in Tesla’s ever-expanding electric vehicle empire. In Q1, the country accounted for more than half of the carmaker’s deliveries, partly thanks to its competitive pricing strategy. Musk is also unabashed about his support for China’s demanding work culture even as the rigorous “996” schedule has drawn fire from the country’s tech workers in recent years.

Chinese people have reciprocated Musk’s affinity. With over two million followers on Weibo, the country’s answer to Twitter, Musk shares his thoughts and admiration for China, earning him the endearing nickname “Iron Man.” His popularity extends to a man from eastern China who became an overnight sensation due to his striking resemblance to the billionaire.

Musk’s visit to China holds the potential to strengthen Tesla’s ties with the world’s largest auto market. As he busies himself with meeting high-ranking Chinese officials and core partners, we are compiling a rundown of Musk’s activities in China and their implications for Tesla’s future strategy for the country. The list will be continuously updated throughout his trip.

Bilateral relations

Bilateral relations took center stage on Musk’s first day in China, as he received a warm welcome from China’s foreign minister Qin Gang. The gesture indicates that Beijing attaches great importance to Musk’s visit, seeing it as an opportunity to send Washington a message amidst strained diplomatic relations.

While Qin stressed that China’s development is an opportunity for the world, Musk echoed this sentiment, stating that Tesla opposes decoupling or cutting off supply chains and is ready to expand business in China and share in China’s development opportunities, tweeted the nation’s foreign ministry spokesperson Hua Chunying. Musk here seems to be reassuring foreign firms affected by the escalating tensions between the U.S. and China that the gate of the Middle Kingdom is still open.

It’s worth noting that Musk has refrained from tweeting since his private jet reportedly landed in Beijing on Tuesday morning. This departure from his usual prolific tweeting is expected since Twitter is banned in China; he’d be publicly violating Chinese laws by circumventing the Great Firewall that blocks it. Knowing this trip’s objective is to facilitate important deals, Musk probably wants to avoid any controversy.

While Musk may not be active on Twitter publicly, he took to Weibo to sing a little praise for China. “The China space program is far more advanced than most people realize,” he wrote.

The comment is intriguing not least because SpaceX, Musk’s own company, is aiding U.S. efforts in putting astronauts back near the lunar surface by 2025. Outer space has become a significant arena for U.S.-China competition, with both nations intensifying investments in space programs. As evidence, China announced its plans on Monday to send astronauts to the moon before 2030.

Battery security

On the first night of his trip, Musk chose to dine with an essential supply chain partner. He met Zeng Yuqun, chairman of Contemporary Amperex Technology Co. Limited, according to Reuters.

CATL, the world’s biggest battery manufacturer, ranks among Tesla’s top three battery suppliers alongside LG and Panasonic. Since 2020, Tesla has been using CATL batteries in its vehicles made in China and soon became the battery maker’s biggest customer.

Batteries are the heart of electric vehicles, profoundly impacting a car’s overall energy efficiency and cost. Securing a stable battery supply is thus vital to ensure smooth production, prompting EV makers to forge close relationships with their battery partners.

Despite their close ties, Tesla is somehow not included in the list of EV makers participating in CATL’s aggressive price-cut scheme. According to Chinese media outlet 36kr, CATL is offering ce customers the option to buy lithium carbonate, a key material of lithium-iron-phosphate batteries, which dominate the EV market in China, for a set price of 200,000 yuan ($28,140) per ton. That’s a very competitive offer compared to the market price, which peaked at around 550,000 yuan per ton in November.

There’s a catch though. Nio, Geely’s Zeekr, Huawei and other carmakers opting into the program will need to source 80% of their batteries from CATL. However, Tesla seems to be taking a different approach by venturing into battery manufacturing and lithium mining. This move aims to enhance Tesla’s supply chain control, suggesting that it will not want to rely solely on a single supplier.

There could be other topics of discussion between the two. Tesla currently sources battery-grade lithium from suppliers including, China’s Ganfeng Lithium, but CATL is also making strides into the mining sector as it snatches up resources worldwide, even outbidding Ganfeng for a major miner. It remains to be seen how this partnership between Tesla and CATL will develop in the future.

This is a developing story…