Cars and Drivers
Major Car Company Relations in China Present Huge Risk for Tesla
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Tesla Inc. (NASDAQ: TSLA) has had extraordinary success in China. It will build a manufacturing facility there. However, as tensions about company ownership flair between the United States and China, Tesla is particularly vulnerable. It does not have the close relationships with local car companies that some of the world’s largest auto manufacturers do. If China decides to attack American manufacturers, it likely will not hit those where there is a risk that Chinese companies will be damaged.
The most recent tension between China and the United States over barring companies involves video-sharing service TikTok, which is owned by ByteDance. The U.S. government says it will shut down the American operations of TikTok. The Chinese company’s only way out may be to sell these assets. Microsoft is a possible buyer. More recently, Tencent’s WeChat social media platform has been hit with the same threat. WeChat may have had as many as 100 million downloads in the United States.
There is speculation China will block some Apple operations in China. Cisco Systems also has been mentioned as a target. China has plenty of targets. Many of America’s largest companies have substantial operations there.
Among American businesses that have operations in China are Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM).
General Motors and its Chinese partners employ 58,000 people. These partners include joint ventures with SAIC General Motors, one of the country’s largest car companies. Any actions by the government aimed at GM would hurt SAIC GM, which the Chinese government owns. GM also has relationships with Panasia Solutions and Liuzhou Wuling Automobile Industry. The Chinese company owns the majority of the joint ventures in most cases.
Ford’s largest partner in China is Chongqing Changan Automobile. The Chinese government owns it.
Tesla does not have partnerships with Chinese government-owned companies. Tesla’s Giga Shanghai is a factory facility that will start up next year. It is owned by Tesla Motors Hong Kong. In fact, Tesla is the first U.S. car company that does not have a Chinese joint venture partner.
Tesla’s factory will employee Chinese residents. However, this tether is not anywhere as close, financially, to those that GM and Ford have. China almost certainly will target highly visible U.S. companies if the friction that involves TikTok and WeChat worsens. That makes Tesla a possible target.
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