Can Elon Musk’s Tesla keep straddling the US and China?


Even by Elon Musk’s mercurial standards, this has been quite a week. 

On Sunday, it seemed as though the maverick billionaire boss of Tesla, SpaceX and social media platform X had pulled off an unlikely coup when he made a surprise visit to Beijing to meet Li Qiang, the Chinese premier and number two in the country’s political hierarchy.

Hours later a Chinese industry group revealed that Tesla’s electric vehicles had been included on a list of more than 70 car models that have been tested for data security compliance. Then people close to Baidu, China’s Google, confirmed a tie-up with Tesla that would give Musk’s company access to the Chinese group’s navigation, mapping and data systems.

Through the sheer force of his own personality, Musk appeared to have smoothed the path for his semi-autonomous driving technology — dubbed FSD, or “full self-driving” — to be rolled out across the 1.6mn Tesla cars already on Chinese roads. Musk believes this technology is central to the future of the EV market, saying that “everything else is like variations on a horse carriage”.

As Musk’s private jet took off from the Chinese capital on Monday afternoon the market approved. Tesla shares jumped 15 per cent and analysts declared a “watershed” moment for the company. This provided some relief to a stock that had at one point fallen more than 40 per cent in 2024, the worst performance on the S&P 500.

Elon Musk meets Chinese Premier Li Qiang in Beijing last weekend
Elon Musk meets Chinese Premier Li Qiang in Beijing last weekend. The Tesla chief is forging closer ties with the Chinese government, including over data transfers © Wang Ye/Xinhua/AP

But at Tesla’s headquarters in Austin, Texas, drama was brewing. On Monday evening, an internal memo landed in top executives’ inboxes: Musk told them he was gutting the division that runs Tesla’s EV “Supercharger” network, dismissing two senior executives and firing hundreds of staff, including the company’s entire public policy unit. A few days later, the head of HR was the next to depart.

As he swung the axe, Musk gave a warning. “Hopefully these actions are making it clear that we need to be absolutely hardcore about headcount and cost reduction . . . While some execstaff are taking this seriously, most are not yet doing so.” 

Musk is notorious for his uncompromising and unconventional management style: after his $44bn takeover of Twitter in 2022, now rebranded X, he forced all employees to sign a pledge to be “hardcore” or quit.

But the scale and bluntness of the latest revamp at Tesla has rekindled scrutiny of the 52-year-old’s leadership style and his ability to personally oversee an empire of self-driving cars, rockets, satellites, and a social network used by more than 500mn people. 

Combined with a radical strategic pivot at Tesla towards autonomous driving, artificial intelligence and robotics, the decisions have left staff, customers, rivals, as well as some analysts and investors reeling.

Bar chart of Sales (‘000s) of new energy vehicles* in China showing Tesla is fighting against a rising number of domestic Chinese EV producers

The week’s turbulence has also come at a time when Tesla faces its greatest challenges since EVs became mainstream: a brutal price war with Chinese rivals and the ramping up of great-power geopolitical rivalry between Beijing and Washington.

As Musk forges closer ties with Xi Jinping’s administration, including over data transfers, he runs the risk of a backlash in a Washington increasingly anxious about China and its technological prowess. Just last month, Congress passed legislation aimed at forcing the video app TikTok to separate from its Chinese owner ByteDance or face a countrywide ban.

“He’s polarising, his positions are alienating some of his core constituents, including the state of California,” says Bill Russo, the former head of Chrysler in China and founder of Automobility, a Shanghai consultancy. “Now, can he thread the needle, and in a very bifurcated world, act in a way that goes against the grain of the geopolitical bias that exists in the west towards China?”


For the past few years, Musk’s opinions and behaviour seem not to have put off the people who might one day buy his cars. There are signs that this is beginning to end.

Already, dealers in the US have warned that potential Tesla drivers are deciding to buy rival electric models in protest against Musk’s provocative political outpourings on X.

Motorists charge their vehicles at a Tesla Supercharger in Indio, California
Motorists charge their vehicles at a Tesla Supercharger in Indio, California. The company’s charging network had become the industry standard, with 15,000 sites in North America © USA TODAY NETWORK/Reuters

The decision to fire almost the entire 500-strong Supercharger team this week with no notice and little public explanation has sparked further questions from investors.

The charging network — with 50,000 sites globally and 15,000 in North America — had become the industry standard, forcing rivals to sign lucrative contracts to use it. Musk has said expansion will slow down and many proposed sites have been scrapped.

Critics have blamed the Twitter acquisition for distracting Musk.

Since he started buying substantial chunks of shares in Twitter in early 2022, culminating in the deal in October that year to take it private, Tesla’s finances and sales have deteriorated. The company’s market capitalisation has roughly halved, from $1.2tn in November 2021 to $575bn.

As his focus returned to Tesla this year, Musk has taken some drastic steps.

In April, he announced 14,000 job cuts — about 10 per cent of its total workforce — ahead of a 9 per cent drop in first-quarter revenue and a warning that “vehicle volume growth rate may be notably lower” than in 2023.

Musk then put plans to develop a new $25,000 affordable model on ice, instead announcing plans to launch a lower-cost version of its current models, and shifted resources to a new self-driving “robotaxi” as part of a radical rebranding of the company’s mission as “robotics and AI”.

A fleet of tens of millions of autonomous cars will become a “combination of Airbnb and Uber”, Musk forecast. In their idle time, the vehicles’ spare processing capacity would be networked to train AI models.

Investors and followers of the company are divided about the wisdom of recent decisions and change in focus, especially because Tesla still makes 82 per cent of its revenue from selling cars.

“He is laying off people critical to the success of Tesla over his misguided belief system,” says Ross Gerber, a long-standing Tesla shareholder at wealth manager Gerber Kawasaki, who has emerged as a prominent critic of Musk. “Tesla can’t sell cars because of him. His response is to blindly eliminate costs instead of addressing the real issue.”

Supercharger “was the fastest growing part and profitable. A monopoly in charging is a massive value generator for Tesla,” Gerber adds. “It is a horrible step backwards.”

James Anderson, a managing partner at Lingotto Investment Management, which holds Tesla shares, has a more pragmatic view of Musk’s actions.

“The approach has always been idiosyncratic and extreme . . . it would be odd to suddenly expect normality in decisions and staffing,” says Anderson. “If autonomous, not volume, is the driver [of growth] then fewer people with a different vision are required. Is this hard, uncomfortable and extremely demanding? For sure.”


As concerns mount over slower-than-expected demand for EVs, in particular in the US and Europe, Musk’s visit to Beijing this week shows he has chosen to bet on China. But Tesla’s operations in the world’s biggest car market — which increasingly relies on data collection to offer advanced driving systems — face new questions over national security.

A Tesla Cybertruck on show in Hangzhou, Zhejiang province
A Tesla Cybertruck on show in Hangzhou, Zhejiang province. China is the carmaker’s largest market other than the US and increasingly a key export hub © FeatureChina/AP

Despite the positive share price reaction on Monday, there were no statements from Tesla, Baidu or the government. Analysts are still in the dark over the details of Tesla’s plans to deploy its semi-autonomous driving platform in China, and how this will be treated by the country’s security-minded regulators.

China is Tesla’s biggest market outside the US, a vital part of the supply chain for its electric vehicles and, increasingly, a key export hub. Musk did a deal in 2018 with Li Qiang, who was then the Communist party boss in Shanghai, to build a multibillion-dollar EV factory in the city — an investment that is credited with helping to spearhead the rapid growth of China’s EV industry.

Since then, the Chinese EV market has stormed ahead. Tesla’s share of new EV sales there stands at 7.5 per cent, compared with 33 per cent for Warren Buffett-backed BYD. Beijing has also overhauled its data governance and anti-espionage laws, creating uncertainty over how companies such as Tesla can move data from cars to and from the US.

Analysts from Bernstein say their “best guess” is that under the new tie-up, Baidu will be a data “gatekeeper”, including backing up data and overseeing transfers to Tesla’s Shanghai data centre and then potentially abroad.

Jeff Chung, a Hong Kong analyst with Citigroup, believes Tesla will be able to create a “firewall” between its US and Chinese operations. This would mean the core AI training process would take place in the US. The company’s China team would “fine tune” the system with data from Chinese users, without the need to export data from China to the US.

Visitors to an AI conference in Shanghai last year view Tesla’s humanoid Optimus
Visitors to an AI conference in Shanghai last year view Tesla’s humanoid Optimus. Musk has rebranded his company’s mission to be focused on robotics and AI © FeatureChina/AP

Chinese data security lawyers say that while Beijing has prioritised EVs, they are still uncertain if Tesla vehicles — which use more cameras rather than the sensors favoured by other EV manufactures — will be permitted to drive near military, government or other sensitive state sites.

Samm Sacks, an expert on global cyber policy at Yale Law School’s Paul Tsai China Center, says that for several years there has been “underlying” tension between security-focused and pro-growth regulatory agencies in Beijing over whether data should be “locked down” or monetised.

“The Xi administration is absolutely prioritising security,” she says, but there is still a friction between economic and security objectives. “Each company is going to have to navigate this on their own.”


Musk still faces a complex geopolitical balancing act.

Tesla’s relationship with India has also suddenly become tense. Musk’s trip to China appeared to be an implicit snub of Prime Minister Narendra Modi. On April 10, Musk had promised to visit India, fuelling hopes about an announcement to build a $3bn electric car plant, only to drop out 10 days later citing “very heavy Tesla obligations”. Nine days after that, he appeared in Beijing.

Longer term, experts are also worried about more clashes between his commercial interests in China and Beijing’s heavy-handed controls on free speech and any criticism of the government. Critics in the US claim he operates a double standard over China and its politics.

During his time in China, Musk used X — despite the platform being banned in the country — to share an audio clip of comedian Jerry Seinfeld bemoaning the negative influence of “the extreme left” and “PC crap” on television comedy. “Make comedy legal again!” Musk wrote, apparently unaware that his hosts in Beijing have recently cracked down on the art form.

Yaqiu Wang, research director for China at Freedom House, a US-based advocacy group, says Musk’s “cosiness” with the top Chinese leadership makes a “total mockery” of his purported championship of free speech, given that people in China have faced detention for using X.

“The CCP cares a great deal about what is said about itself on X, and it has a track record of leveraging foreign companies’ market access to China for its political agenda,” she says. “We should all be very concerned.”

Additional reporting by Harriet Agnew, Arjun Neil Alim and Nian Liu



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