
Tesla Strikes Deal With Shanghai to Build Factory in China - prostoalex
https://www.wsj.com/articles/tesla-strikes-deal-with-shanghai-to-build-factory-in-china-1508670181?mod=e2fb&mg=prod/accounts-wsj
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omarforgotpwd
The 5% stake in Tesla Tencent took a few months ago was extremely strategic.
Not only did Tesla get some much needed capital for Model 3 production, I'm
sure Elon's friends at Tencent were happy to introduce Tesla to the right
people in the Chinese government to make this deal happen and boost their
Tesla stake. A crucial step as China will likely soon represent the biggest
market for EVs (if it isn't already?). Just goes to show every entrepreneur
how valuable equity in your company can be not just for access to capital, but
also access to people.

~~~
sidcool
It's a bit sad that some Governments exercise so much control on businesses
and knowing the right people means so much.

There should be a Goldilocks zone between Laissez-faire economy and extreme
regulation.

~~~
fsloth
"...knowing the right people means so much."

Doesn't it everywhere in life? Unless one prospects gold in the wilderness, I
suppose.

~~~
watwut
Interesting that HN tend to swing between two extremes in this: "it is
meritocracy, all is just about work" and "everything is corrupt and based on
who you are friend with" (plus some who attempt to frame latter as former
through it is not).

~~~
DanHulton
Keep in mind, HN isn't just one person.

~~~
watwut
Yes, but it as if the two groups never met, I don't recall discussion between
the two. Also it is as if there would not be people in the middle (where I am)
.

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tristanj
Seems like Tesla has been eying this move for over a year. Bloomberg [0] broke
this story last year (June 2016) saying Tesla planned to invest $9 billion in
Shanghai, according to a 'person with knowledge of the matter'. However, one
key point from last year's article is:

 _Manufacturing in China would allow Palo Alto, Calif.-based Tesla to avoid a
25% import levy, making its electric vehicles more competitive against luxury-
brand rivals, such as BMW and Audi, as well as local offerings by BYD and
BAIC._

Last year, it sounded like Tesla's motivation to manufacture in China was to
avoid this tariff. Now today's WSJ story says Tesla is still likely to pay the
25% tariff. Sounds like Tesla got shafted by Chinese protectionism.

[0] Non-paywalled Bloomberg article
[http://www.industryweek.com/competitiveness/shanghai-said-
be...](http://www.industryweek.com/competitiveness/shanghai-said-be-front-
runner-tesla-china-production-site)

~~~
njarboe
I thought China was part of the WTO and has most favored nation trade status
with the US. Does the US have such high import taxes on Chinese goods? I don't
think so. Googling around I found this[1] 2014 article about unfair taxes on
US cars and a win for the US in the WTO court, but maybe China just ignores
that ruling. It does not seem reasonable for the US to allow China to impose
taxes and force tech transfer from the US, especially since the US has such a
high trade deficit with China. There was some talk about this problem during
the US election, but I have not seen any action on the issue yet.

[1] [http://www.latimes.com/business/la-fi-wto-autos-
china-201405...](http://www.latimes.com/business/la-fi-wto-autos-
china-20140524-story.html)

~~~
ksk
I think your comment needs a historical perspective. Protectionism and tariffs
played an important economic part in the rise of all of the current world
superpowers. Pretty much everyone from the USA, to GB to Sweden practiced
heavy protectionism through tariffs and subsidies (which also featured in the
civil war). While you can pick any window in history and adjudicate whats
"fair", the alternative to "Chinese are sneaky" is that they're simply doing
what others did before them to become dominant.

~~~
njarboe
If you read my comment I am not talking about "fairness" or advancing some
crypto Chinese racism. China is doing great and advancing quickly. Good for
them. My perspective was from the other side and questioning weather or not
the policy from the US side is a net good for the people in the US, aside from
the top 0.01%.

~~~
ksk
I'm not suggesting you personally harbor ill towards them in a racial way. I
could have worded it better, sorry ! My comment was political. A lot of
commentators here seem to not understand the historical perspective on
tariffs, and subsidies and protectionism.

I think people understand the 'every country will look out for themselves'
part. What a lot of people don't is the 'this is what we used to do too' part.

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nodesocket
I wonder how concerned they are about leaking proprietary technology from
Chinese employees. Apple constantly struggles with this since the employees
are paid little, but the incentive to leak and "share" information is very
lucrative.

~~~
rdl
I thought Tesla (unlike SpaceX, due to ITAR/etc.) was pretty open with their
technology. I assume Elon would be happy if all of the non-EVs in China copied
Tesla. OTOH, I think the Chinese market actually already has better EVs for
90% of the Chinese market, and the market for Tesla is the high-end prestige
market which wouldn't be so affected by copying (they don't copy BMWs today)

[https://www.tesla.com/blog/all-our-patent-are-belong-
you](https://www.tesla.com/blog/all-our-patent-are-belong-you)

~~~
miketery
I believe this only applies to charging tech so that the whole industry is
standardized for charging stations. I don't think Tesla shares any of their
chemistry, power management, and other high value IP.

~~~
KGIII
As far as I know, it is _all_ patents. Here is another source, as linked in my
above post:

[https://www.wired.com/2014/06/tesla-just-gave-all-its-
patent...](https://www.wired.com/2014/06/tesla-just-gave-all-its-patents-away-
to-competitors/)

~~~
thisisit
From the article:

> Tesla CEO Elon Musk announced today that his company will not "initiate
> patent lawsuits against anyone who, in good faith, wants to use our
> technology."

The question really is - what defines "good faith" for Musk and Tesla.

Additionally, I am no patent expert but it will be interesting to see
licensing terms, if any. Specially after what happened with React and
Facebook.

~~~
KGIII
The link in another response to me has a link to a clarification video from
Musk. I didn't watch it, as the text was adequate. It looks like no licensing
is required and that they've been legally dumped into the public domain in a
binding fashion - maybe. That's not actually ever been ruled on in a court,
from what I can find via Google.

That post suggests no company legal team would allow it. The article thinks
Apple might use it, as an example of a user.

I am no expert, so I'll defer to others.

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martin1975
This should be a boon for China's air quality if they start to mandate EVs and
ban fossil fuel vehicles. They are suffering from major, major pollution that
makes 70's LAX smog look like child's play

~~~
jayd16
I'm not sure EVs are going to make a difference unless they move from coal
plants to something else.

~~~
harryVic
Coal plants are more efficient than internal combustion engines.

~~~
xyzzyz
At generating energy? Yes. At emissions per watt? Not necessarily. Coal is
much, much dirtier fuel than gasoline.

~~~
nitrogen
Metropolitan emissions per mile would be the important metric, since gasoline
in cars is at most ~30% efficient, and coal plants can be built away from the
city.

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dis-sys
People need to understand that 25% import tax is a feature not a bug, it
allows Tesla to be classified as imported cars, separating itself from a long
list of American/German cars made in China with a local partner. There are
huge demand for such "imported" cars. Look at Porsche, every single one of its
cars are imported into China with stupidly high taxes, yet 1/3 of its global
sales are in China, you need to wait 3-6 months to get the most popular models
(Macan and Cayenne).

~~~
yourapostasy
Can a "cultural translator" explain why the Chinese consumer market is so
highly susceptible to Western marketing of import brand marks, for highly-
specific products, when otherwise they appear strongly nationalistic?

This doesn't seem to broadly carry over into all products. My gut-feel
impressions from visiting China: Cars, yes. Phones, no. Scotch, yes. Watches,
no. Clothes, no. Houses, no. Household appliances, no. Bottled water, no.

Americans have their yes/no list, various European citizens have theirs, and
so on. And there are sub-groups (like I'm aware of a market for ultra-premium
watches with 5-figure+ USD price tags among some hedge fund types), but I'm
interested in characterizations at a broad national level. I'm curious to hear
from Chinese or Chinese culture-fluent what factors in their opinions went
into the make up the Chinese national variant of this list.

~~~
fastball
I'd just like to modify your list in that I think wealthy Chinese consumers
are highly susceptible to certain designer clothing and accessories, ala
Gucci, Louis Vuitton, etc.

I think everything else can be explained by a sort of clash between
utilitarianism and a desire for status symbols. Tools that can be readily
copied in China and produced much more cheaply are sold as that: tools. So
phones, watches, appliances, etc. Cars and clothes can also be readily copied,
but even in the west they show more status than the other things listed. So
when it comes time to copy them, it's more apparent when you have a Chinese
knockoff vs. an "original".

Scotch is hard to copy.

~~~
user5994461
1) Status 2) price+quality 3) localization 4) regulation 5) not necessarily in
this order

For instance take a look at Xiaomi phones. They are better in every aspect
than any western phone you could find in the < 500$ price range.

Western cars are designed for regulations that don't exist in China, think of
emission controls and safety. Local manufacturers don't bother with that.
Expect any western car to be overpriced and inappropriate for the china
market.

Truly luxury brands like Apple and Porsche makes it because of status.

~~~
notfromhere
That's probably why the wealthy are buying Western cars, they're safer. Hard
to be rich when you get crumpled like a tincan in a locally produced vehicle

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MechEStudent
China doesn't believe in IP. Tesla should look within 1-2 years of startup of
a Chinese plant for there to be other Chinese plants producing the exact same
parts, but not for Tesla. If Tesla puts its "magic smoke" into that factory,
they have given it away to multiple competitors.

~~~
ZeroGravitas
That would however be in line with Tesla's stated mission:

 _The Mission of Tesla. Our goal when we created Tesla a decade ago was the
same as it is today: to accelerate the advent of sustainable transport by
bringing compelling mass market electric cars to market as soon as possible._

------
logfromblammo
This stinks of my cynicism, but I hope Tesla doesn't mind competing with
unbranded, unlicensed Chinese copies of Tesla-designed vehicles.

Based on their blanket grant of royalty-free patent licenses, I wouldn't think
so, but that might just be the sort of idealism you see when a competitor
doesn't have you up against the ropes, pummeling the snot out of you. It's one
thing to go read the patents and maybe add the parts you understand to your
product. It's another thing entirely to be able to observe an entire
functioning assembly line and copy it down to the millimeter.

And that is something that will happen to any factory Tesla sets up on
mainland China. Then they start chopping off the more expensive bits. Tesla
must be betting that the x% of the Chinese market that cares about brand and
can also afford to pay for genuine goods would buy a real Tesla instead of a
nigh-identical knockoff, at rates high enough to be significant against the
25% tariff. That kind of financial math is beyond my expertise, though.

------
sanguy
Wonder how this will impact the model 3 backlog. Many of the Tesla fans have
bought into the US made, green, and disruptive angles - in various levels of
importance.

Will be interesting to watch how the backlog develops with this change. Could
be quite significant.

Also if we factor in the layoffs last week in California and now this move how
long until Trump takes a punch on Twitter as Tesla?

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jordache
now let's see if chinese made teslas will be of higher quality than U.S. made
units. The bar is set pretty low right now to surpass U.S. Tesla build
quality.

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mozumder
Why are there still import tariffs in the US?

~~~
averagewall
Because Americans prefer to vote for politicians who take payments from
industry groups in exchange for setting tariffs that protect them from
international competition.

~~~
swimfar
Are there car-producing countries that don't have import tariffs?

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mkriss
What

~~~
tristanj
_Edit: The parent comment was orignally asking about linking to non-paywalled
secondary sources._

In the HN guidelines
[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

> _Please submit the original source. If a post reports on something found on
> another site, submit the latter._

Also, on paywalls
[https://news.ycombinator.com/item?id=10178989](https://news.ycombinator.com/item?id=10178989)

~~~
typeError
So knowledge should be trapped behind a paywall?

~~~
dang
We've been through this countless times, which is why it's in the FAQ.
Paywalls suck, but HN would suck worse to do without NYT, WSJ, Economist, and
New Yorker articles, to name a few. It's the lesser of two evils and it's off-
topic to endlessly litigate this.

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j05huaNathaniel
Bye bye US Government subsidies.

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throw6555
To be read as the beginning of the end of Tesla factories in the US.

~~~
mproud
I doubt Tesla will give up on their U.S. factory, unless the company ever
enters dire financial trouble. There have been (and still are) major auto
makers with factories in the U.S. It is to their advantage to operate more
than one factory if ever there are labor issues, governmental issues, or even
natural disasters that could stop production.

~~~
sanguy
I suspect US will be reserved for high end S/X models, with the model 3 likely
majorily in China.

