China and Tesla Sitting in a Tree
Something is going on between Elon Musk and China! After touching down from a high-profile business trip to Shanghai, the Tesla boss had come back with plenty to show for his Asian holiday.
Investors often fall prey to distance bias, which is to wrongly believe things are better in faraway lands than they are at home. China risks falling into that category, but since Elon jetted off there to check up his new Gigafactory, he’s said the grass really is greener on the other side. Making President Xi’s head big, Elon called “China really the future,” and what he’d seen from his Tesla China team “mind-blowing.”
The Chinese government plays a very hands-on role in business, taking an especially hard line with American firms that want to get their mitts on the billion-strong population. However, authorities have clearly taken a liking to Musk and his electric vision. To qualify for a free pass on tax, Western firms typically need to lock-arms with a Chinese firm first. With Musk doing the talking, Tesla managed to bag itself a tax exemption while staying single! Jackpot!
Still, some more experienced market watchers can’t hide their suspicions. In Asia, business and politics are two-in-one. If Tesla is too far ahead of the Chinese tech sector to find a partner in its league, that elusive ten percent tax exemption may have forced Elon into a collaboration with the government instead! With sparks flying from the trade war, this deal will make his Model S, 3, and X, far more affordable.
The automotive industry is fighting tooth and nail for electric, shared, autonomous, and connected car dominance. As a completely electric company, Tesla may have won itself preferential treatment in the hottest growth market out there. The wheels have come of Tesla’s stock this year, but could this turn it around?