China defeats Elon Musk in Tesla battle

opinion

by kevin williamson

It’s easy to forget that Elon Musk’s main business is building cars, not being the king of social media trolls.

Perhaps the news that Tesla has fallen to second place in the electric car market behind its Chinese rival will bring his notorious wandering mind into focus.

(Don’t get caught up in marijuana, kids!)

When Chinese electric car maker Changan unveiled its SL03 sedan in 2022, it was clearly a Tesla Model 3 clone. It’s such an obvious copy that you’d expect to see it being sold on Canal Street somewhere between a fake Louis Vuitton and a Louis Vuitton. Bags and fake Rolex watches.

Other Chinese manufacturers have copied everything from Tesla’s user interface to its website design.

In 2019, Tesla won a settlement from a former employee accused of stealing Autopilot technology for a rival company in China.

China has long tried to shake off its reputation as a “copycat state,” but old habits die hard and innovation is dangerous in a police state — one area where Chinese innovators shine is in artificial intelligence tools. It is not surprising that the development of for surveillance.

Keep that in mind when making sense of the news that China’s BYD has surpassed Tesla in electric car sales.

BYD is the epitome of a Chinese copycat model, getting its start in the auto business by simply reverse-engineering and plagiarizing the designs of its competitors, including the innovative works of Toyota and Mitsubishi.

But like the United States, China has a very large domestic market that allows companies to grow very large and sophisticated even within the walled gardens of China’s protectionist economy.

And the wall hasn’t collapsed.

that Xi Jinping, a true believer socialist, believes that liberalization has gone too far in some cases, rather than continuing the move towards markets and open exchanges begun by his predecessors; And Beijing’s central planners have made it clear that the time has come to reassert themselves.

While this may make sense politically for Mr. Even he himself has been forced to admit that his country is in trouble.

China’s economic protectionism is complicated by the proliferation of state-owned enterprises (including those owned by the military) and internal factional conflicts.

For example, subsidies at the local level to boost local automakers and other local businesses over other Chinese competitors cost Chinese consumers billions of dollars annually.

Companies like BYD may not be explicitly state-owned, but they are dependent on the state, creating an uncomfortable and small circle of money and power between the Chinese Communist Party and nominally private markets. Department.

For example, when the Shenzhen city government mandated that taxi fleets be converted to EVs, it was no surprise that Shenzhen-based BYD was chosen to supply them. As a result, the company’s sales volume exceeded 21,000 units.

For example, when the European Union (EU) launched an investigation into whether China’s EV subsidies were large enough to trigger EU anti-‘dumping’ measures, the Chinese government screamed and howled. But no one in their right mind believes that Tesla and BYD follow the same rules. in the Chinese market.

And actually, most of the time, that’s fine. Yes, free markets and free trade would be good for everyone. But the real cost of China’s protectionism comes primarily from Chinese consumers who are forced to accept lower standards. They live to line the pockets of politically connected business interests and party officials.

Much the same is true in the United States. America’s foolish war on Canadian timber benefits a few influential American businessmen at the expense of consumers who pay more for things made of wood, such as homes.

China is going to do what China is going to do, and Xi Jinping will do everything he can to stay in power for the same reason as Vladimir Putin: Gangsters have no retirement plan. Tesla shouldn’t expect to find many friends in Beijing.

But if I were to give advice to Elon Musk, what I would tell him (besides removing himself from his stupid social media platforms) is that rather than worrying about Chinese-made knockoffs, I would tell him: You’ll probably be worried about EV competitors from large, well-established companies like Yahoo! Mercedes and Volkswagen Group.

Tesla may have surpassed them in terms of market capitalization, but Volkswagen still sells about 5 cars per year for every Tesla.

Tesla may get credit for creating the modern EV market, but Elon Musk’s accomplishments in that regard are truly extraordinary no matter how you look at his online antics, but he’s a pioneer. does not always confer a lasting advantage.

In 2023, customers looking to purchase Porsche’s Taycan electric sedan faced waiting lists of up to 18 months due to such high demand.

Mercedes has had great success with EVs.

Musk may have created something of a nihilo past with Tesla, but Mercedes has been successfully selling cars for almost as long as cars have been around and will be a formidable competitor.

As always, no matter what strongman tactics Xi Jinping tries, the market will ultimately resolve this issue. But that doesn’t mean the market will resolve in Tesla’s favor.