China’s Tesla trap
China built a Tesla trap, and Elon Musk dove in with both feet.
One thing American and European manufacturers, from chips to cars, have noticed about China is that it doesn’t take long for their products to be duplicated. Local construction companies, seeing plant blueprints, have even helped build clone plants in other towns or even down the road, right down to the signs advertising the original company.
It’s caused everything from Birkenstock to (brand beginning with Y) to deal with angry clone-customers, who insist that the company fix products they didn’t actually make, but which show their names and look like the originals.
China has long been investing in electric car technology; BYD has just about cornered the electric bus market, and was showing off credible, innovative hybrids years ago. But Tesla, despite its appalling body quality, autonomous-driving safety shortcuts, and poor treatment of its own employees, may still have the best engines of any electric car out there. (Its battery technology, supplied by Panasonic, is also a competitive advantage, but one which is, well, supplied by Panasonic).
How can Chinese companies get their hands on the core of that technology? Well, they could offer to build Tesla a factory in China, and then either simply observe-and-copy the company’s systems, or, down the road, extort company secrets by finding some legal issue and threatening to impound the entire plant.
China’s automotive market is tough for everyone; it’s too big to ignore, but it’s also dangerous to participate in. Your fortunes can rise and fall on the whim of regulators, and you never know what will happen to your industrial secrets. Perhaps the Chinese government sincerely wants to bring in as many electric cars as it can, in its newfound effort to mitigate environmental disaster; or perhaps they have something else in mind.
Tesla, in any case, needs the money. Though they just closed a second consecutive profitable quarter, their net income ($143 million) was very close to their sale of emissions credits ($134 million); and other automakers are bringing out their own hybrid and full-electric cars in an attempt to stop subsidizing a competitor. Volkswagen and Audi will be flooding Europe and then North America with electric cars, followed by Ford, General Motors, Fiat Chrysler, Mercedes, BMW, and just about everyone else (BMW’s already in the game, really, but few have noticed). Jaguar’s own electric crossover sold out quickly.
Did China give Tesla a factory because they want to reduce their oil usage, or because they want to grab key technologies? History suggests the latter, but if it’s the former, Tesla will do very well from the deal.
Clark Westfield grew up fixing up and driving past-their-prime American cars, including various GM and Mopar V8s. He has ghostwritten auto news for the last few years, lives in Farmingdale, New York, and can be reached at +1.516-531-4021.