Elon Musk Rejects US Decoupling Beijing Claims

HONG KONG—China’s foreign ministry indicated that Elon Musk communicated to officials in Beijing his opposition to the decoupling of the world’s two largest economies during a meeting that took place shortly after the Tesla CEO’s arrival in China amid heightened geopolitical tensions with the U.S.

Chinese officials released a statement on Tuesday evening, quoting Musk as he expressed to Foreign Minister Qin Gang that the interests of both nations were interconnected and inseparable, likening them to “conjoined twins.” The ministry shared a photograph of Qin and Musk exchanging handshakes.

This visit marks Musk’s first trip to China in over three years, as the country had largely restricted travel due to the pandemic. China is a crucial retail market for Tesla and houses its largest manufacturing facility.

During the meeting, Qin drew a parallel between China-U.S. relations and driving a Tesla vehicle, emphasizing the need to handle the steering wheel correctly, apply brakes at the right time, avoid dangerous driving, and appropriately utilize the gas pedal, as per the ministry’s statement. Tesla did not provide any comment. Grace Tao, a Tesla executive overseeing external affairs for its China operations, reposted the foreign ministry’s statement on her Weibo social media account.

Musk joins a list of foreign CEOs, including Tim Cook of Apple and Albert Bourla of Pfizer, who have recently visited China to meet senior officials and tour local facilities after pandemic-related restrictions disrupted supply chains.

Competition over advanced technologies has strained U.S.-China relations, and tensions escalated further when the U.S. shot down a Chinese balloon in February. Businesses from both countries have found themselves caught in the middle. The latest incident occurred this month when China blacklisted U.S. memory-chip manufacturer Micron Technology.

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The Micron ban amplified hawkish sentiments towards China in Congress and was widely viewed as a response to stringent new export controls imposed by the Biden administration last year on advanced semiconductors and semiconductor-manufacturing equipment destined for China.

The heightened pressure from Beijing on foreign businesses, including a crackdown on due diligence and consulting firms engaged with foreign enterprises in China, has unsettled numerous foreign companies and executives.

Last year, Elon Musk welcomed Qin to Tesla’s Fremont factory in California when Qin served as the Chinese ambassador to the U.S.

The term “decoupling” has gained prominence among foreign executives and policy experts, referring to the unraveling of deep economic and commercial ties established over the years between the U.S. and China. U.S. officials have clarified that they are not seeking to decouple from China but rather safeguard their technological interests.

However, several companies heavily reliant on Chinese supply chains, with Apple being a prominent example, have recently sought to reduce their dependence on China, employing strategies such as “de-risking” or “China plus one.”

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Tesla, on the other hand, has deepened its commitment to China, announcing in April its plans to construct a second factory in Shanghai for the production of the Megapack energy storage system.

China’s Foreign Ministry’s comments emerged a day after China rejected a U.S. request for a meeting between their defense chiefs in Singapore over the weekend, underscoring the limitations of the tentative détente between the two powers.

Elon Musk has previously expressed admiration for China, describing its economic prosperity as truly remarkable and praising its data regulations. Some of Musk’s ties to China have raised concerns in Washington, particularly among Republican lawmakers who have been among his staunchest supporters.

Sources familiar with the matter expect Musk to visit Tesla’s Shanghai factory later this week.

Following the establishment of its gigafactory in Shanghai in 2019, becoming the first wholly owned foreign automaker in China, Tesla experienced a period of booming car sales in the world’s largest automobile market. However, the company now faces fierce competition from domestic rivals who

offer comparable electric vehicles at lower prices as the Chinese car industry matures.

Data from the China Passenger Car Association indicates that Tesla’s market share in China declined by almost one-third, from around 15% in 2020 to 10% last year. Chinese industry data and company filings reveal that over half of Tesla’s electric cars delivered worldwide last year were manufactured in China, contributing approximately 22% of its revenue, with nearly 440,000 EVs sold in the country.

Moreover, Tesla has played a pivotal role in driving the expansion of China’s EV industry, as domestic brands manufactured eight out of ten cars sold in the country last year. Chinese EV manufacturer BYD has surpassed Tesla in sales both in China and globally.