Tesla Stock Surges After Musk Visits China
Tesla’s stock rose four percent overnight on May 30th U.S Eastern Time, resulting in a market value surge of over 25 billion dollars. This was in response to Elon Musk’s first visit to China in three years.
Musk’s Busy Schedule Attracts Attention
Musk’s schedule in China was busy, attracting attention from media and netizens. According to the Chinese Foreign Ministry website, on May 30th, State Counselor and Foreign Minister Wang Yi met with Musk. Musk stated that Tesla opposes decoupling and is willing to continue expanding its business in China to share development opportunities. Later that day, a photo of Musk meeting with Robin Sang, the chairman of CATL, the largest supplier of batteries sold to Tesla, circulated on social media.
Foreign Executives Visit China Amid Tensions
Amid ongoing U.S China tensions and calls for decoupling, Musk not only fulfilled his rumored China trip, but also publicly opposed such measures. Deepening cooperation with Chinese companies is of significant importance. Nvidia CEO Jensen Huang is also scheduled to visit mainland China according to a Chinese Nvidia distributor.
Foreign Executives Visit Reflects China’s Open Attitude
Musk and Huang are just the latest names on a long list of foreign Executives to visit China this year, including Apple’s CEO Tim Cook, Intel’s CEO Pat Gelsinger and Starbucks founder Howard Schultz. This trend of foreign Executives visiting China not only reflects China’s friendly and open attitude towards foreign investment and the importance of the Chinese market, but also implies their concern about losing out on the Chinese market.
U.S Led Agreement Aimed at Excluding China
On May 27th, the United States announced that the 14 member countries of the Indo-Pacific Economic Framework (IPF) had reached a consensus on supply chain coordination. This is a U.S led agreement aimed at establishing a supply chain that excludes China.
American Business Community Has Reservations
The American business community has reservations about the agreement. On one hand, Elon Musk wants to control the risks brought by geopolitical factors. On the other hand, Tesla is facing huge competition pressure from Chinese brands, such as BYD, in the Chinese market. Jensen Huang is worried that invidious Chinese businesses may become a sacrifice in the technology war, which will drag down the company’s performance growth.
Difficult to Cut Ties With China
However, no matter how pessimistic the situation is, these foreign companies also find it difficult to cut ties with China. As Jensen Juan recently said in an interview, If we lose the Chinese market, we dont have a contingency plan. China is the only one.
Preparations Before Trips to China
Both Elon Musk and Jensen Huang made ample preparations before their trips to China. As early as April of this year, news broke that Musk was set to visit China and attend a new factory signing ceremony, which was seen by many as a gift before his visit. According to Xinhua News Agency, on April 9, the Tesla Energy Mega Factory signing ceremony was held in Shanghai and the factory will be built in the Lingang New Area of the Shanghai Free Trade Zone. It is expected to start production in the second quarter of 2024 and will be dedicated to producing Tesla Mega Pack, which is large scale commercial, energy storage batteries.
Musk’s Arrival in China
Almost two months after the factory signing ceremony, Elon Musk finally arrived in China before his trip. He indirectly gave a gift to some Chinese: a share shareholders on May 25th neurolink a brain machine interface company owned by Musk, announced that it had been approved to launch its first brain implant device human clinical trial. As a result, several a share brain machine interface concept stocks rose continuously on the day of his arrival in China.
Musk, who is a social media enthusiast, also jumped on the bandwagon of the Shenzhou 16 mission on Twitter, praising China’s space program has more advanced than most people realize before being reported to have visited China.
Jensen Huang’s Visit to China
Jensen Huang, CEO of Nvidia, also expressed his views on the Chinese market recently, since announcing better than expected first quarter results on May 25th. Nvidia stock price has skyrocketed by nearly 30 percent in less than a week, making it the seventh U.S listed company to join the trillion dollar Club. The list of club members previously included Apple, Microsoft, Google, Amazon, Meta and Tesla. However, as Meta and Tesla fell out of the trillion dollar Club, Nvidia jumped to become the fifth largest U.S listed company on the day before the earnings announcement.
Huang expressed his concerns in an interview with the Financial Times, saying that the U.S government’s export restrictions on semiconductor technology had left Nvidia feeling helpless and that the U.S should handle its trade policy towards China with caution. Prior to Huang, CEOs of major semiconductor companies such as Qualcomm, ASML and Intel have also visited China. Semiconductors and new energy are becoming the two major areas of contention between China and the United States, and the two companies with the highest market capitalization in these two areas.
Nvidia and Tesla: China’s Essential Role
Nvidia and Tesla are both U.S companies, but China has long been an indispensable piece in their business puzzle. Intel CEO Pat Gelsinger said in a speech in Beijing in April that China is one of the largest and most important markets for Intel. In the 2023 fiscal year, from February 2022 to January 2023, China’s revenue accounted for 47% of Nvidia’s global revenue. Nvidia’s market value crossing the trillion dollar mark is largely dependent on the Chinese market.
AI Companies and Tesla
The soaring demand for computing power from AI tech companies in the era of large models, half of which are from China and the other half from the United States, has contributed to Nvidia’s market value surge. For Musk and Tesla, China’s significance is not just about the market. In 2018, Tesla was deeply mired in production hell and was shorted in the stock market. Shanghai’s olive branch became Musk’s lifeline. In just five years, Tesla’s Shanghai factory has become its highest capacity factory in the world. China has also gradually become the world’s largest new energy vehicle market for Tesla, its second largest market.
Supply Chain Partners
Both the automotive super factory and the yet to be built energy storage super factory require the cooperation of supply chain partners. This further highlights the importance of China to both Nvidia and Tesla.
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Musk and Zang’s Meeting
According to Chinese media reports, Elon Musk’s meeting with Robin Zang in China may include discussions on energy storage cell supply for the Shanghai energy storage, super Factory, future cooperation in building battery factories in North America and power battery supply. Since CATL began supplying Tesla in July 2020, the two companies’ cooperation has become increasingly close.
Tesla and CATL
Public data shows that in 2021 and 2022 Tesla was CATL’s largest customer for two consecutive years. In 2022, CATL’s lithium battery sales revenue from Tesla was 38 billion Renminbi accounting for 11.59 of its total revenue. Tesla is also in a critical period of expanding production and reducing costs and cannot do without the support of battery manufacturers.
China and the US
As time goes on. The impact of the market variable on the struggle between China and the United States is gradually becoming apparent. However, this does not mean that China is a Promised Land. On the contrary. In the vast Chinese market, competition is everywhere in addition to opportunities.
Musk and BYD
In an interview in 2011, Musk laughed off BYD saying he didn’t believe it would be a true competitor to Tesla and jokingly said. “Have you seen their cars recently?” This interview, video, was dug up by Twitter users and Musk revised his attitude towards BYD, saying that BYD’s cars are now highly competitive.
BYD’s Success
In 2022 BYD’s new energy vehicle production sales reached 1.877 million and 1.8635 million respectively a year on year, increase of 209.17 and 208.64 exceeding The target set at the beginning of the year of 1.8 million.
S. government has imposed restrictions on the export of semiconductor chips to China, and on the other hand, the Chinese government has also imposed restrictions on the import of semiconductor chips from the U.S.
Tesla and BYD: The Battle for Global New Energy Vehicle Sales
BYD Surpasses Tesla to Become Sales Champion
In the past decade, BYD has grown to become Tesla’s biggest competitor, and the two sides have developed a cooperative relationship. According to media reports, Tesla has started production of the Model Y rear wheel drive base model with BYD Blade batteries at its Berlin Super Factory in Germany. This is also Tesla’s first electric vehicle using lithium ion phosphate LFP batteries launched in the European market.
Tesla Feeling Pressure from Chinese Car Companies
As the macro environment deteriorates and industry competition intensifies, Tesla CEO Elon Musk has made concessions to the market for the first time, saying that Tesla will try advertising from laughing off to taking competitors seriously in advertising. The pressure brought by the rise of Chinese car companies is evident for Tesla.
Nvidia Facing Challenges in Chinese Market
Nvidia faces more restrictions than competition in the Chinese market due to its long term layout in the AI field, which has led to a technological and ecological lead. Nvidia has essentially monopolized the supply of AI computing power and its competitors are unable to catch up in the short term. However, under the AI frenzy, Nvidia’s market in China is showing signs of shrinking. In the 2023 fiscal year, Nvidia’s revenue in mainland China and Hong Kong was 5.785 billion dollars year on year, a decrease of 1.326 billion dollars. In Taiwan, revenue was 6.986 billion dollars a year on year, a decrease of 1.558 billion dollars. On the one hand, the U.S. government has imposed restrictions on the export of semiconductor chips to China, and on the other hand, the Chinese government has also imposed restrictions on the import of semiconductor chips from the U.S.
Nvidia’s Struggle to Export High End Chips to China
The US government has issued a series of bans making it difficult for NVIDIA to export high end chips to China. This has created an artificial Supply demand Gap, which is not what Chinese companies and Nvidia want. It not only creates obstacles to the development of the domestic AI industry, but also weakens nvidias development potential.
Nvidia’s Optimistic Expectations of the AI Wave
The optimistic expectations of the AI wave have allowed Nvidia to surpass the trillion dollar market value threshold. But if it wants to stand firmly in the trillion dollar, Club Nvidia cannot rely on one leg with the Boost of generative. Ai Nvidia May reap some dividends in the gaming business. In the long run, autonomous driving is a visible growth curve and if Nvidia wants to make a mark in this field, it must cooperate with Chinese companies.
Foxconn and Nvidia Cooperate to Develop Autonomous Driving Technology
According to Media reports, on May 31st, Foxconn chairman Liu youngway said that Foxconn is cooperating with Nvidia to develop autonomous driving technology after achieving some results in Taiwan. Whether Jensen huangs trip to the mainland can lead to more cooperation is worth looking forward to.
