Elon Musk has made Tesla dependent on China, and China’s rulers know it. “You have me, and I have you,” Chinese Premier Li Qiang told Musk on April 28. Now it is time for a national conversation in the US about Musk’s ownership in both Tesla and SpaceX. Pictured: Musk meets with then Chinese Prime Minister Li Keqiang in Beijing on January 9, 2019. (Photo by Mark Schiefelbein/AFP via Getty Images)
At the end of April, Elon Musk canceled a trip to India at the last minute, instead appearing in Beijing and getting an agreement to save Tesla. The results were immediate: the shares of the electric car manufacturer, which had been out of favor on Wall Street, rose sharply on the news.
Now Washington must be concerned that China will control Musk’s other company, SpaceX, which is crucial to America’s ambitions in space.
During his two-day trip to China, his second in less than a year, the billionaire announced that he had struck a deal with China’s Baidu for mapping and navigation software. The China Association of Automobile Manufacturers said in a statement on April 28 that Tesla’s Model 3 and Model Y vehicles had passed China’s data security requirements.
In China, where car buyers are far more focused on tech features than Americans, Musk has wanted to roll out Tesla’s “Full Self-Driving” software. Currently, his cars only have the basic driver assistance function “Autopilot”. Most observers assume he is on a slippery slope toward Beijing’s approval.
Musk definitely needs the upgrade. Not long ago, Tesla was seen as a standout in China. Now that is no longer the case. BYD Company and “a whole fleet of EV upstarts” are, in the words of Asia Times contributor Scott Foster, “increasingly looking like a regular car company.”
As a result, Tesla’s market share is in a downward spiral. A year ago, Tesla was number one in the retail segment for new energy vehicles in China. In the first quarter of this year, the company had fallen to third place. BYD sold 586,000 cars in the period, Geely 137,000 and Tesla 132,000. It is not clear that Tesla can compete in China, where the regime is doing just about everything it can to favor Chinese competitors.
Musk knows that China is “the golden market for electric cars”. Tesla’s “gigafactory” in Shanghai, which opened in 2019, is the “heart and lungs” of Musk’s car production. The facility is Tesla’s largest outside America. China is now Tesla’s second largest market.
Musk has made Tesla dependent on China, and China’s rulers know it. Unfortunately for Musk, Beijing has a lot of problems with his other iconic venture, SpaceX. First, SpaceX stands in the way of China putting a man on the moon before the U.S. return visit, and Musk’s Starship promises could help the U.S. build lunar bases faster. SpaceX is also a major US defense supplier, and more importantly, the company operates the Starlink satellite constellation in low Earth orbit.
As of last month, Starlink had 5,800 operational satellites in orbit around the Earth. This is as much as 60% of all active satellites. Musk is considering expanding the constellation to 30,000 satellites, and perhaps he is now thinking about 42,000 of them. China knows that unless it detonates more nukes in space, it will have a hard time taking down all those satellites, meaning the US military will almost certainly have continued access to space in wartime.
“Could making more Teslas in China jeopardize SpaceX’s contracts with various US governments?” asked William Pesek in connection with Musk’s visit to Beijing.
Pesek, the Tokyo-based Forbes columnist, didn’t pop that question out of the blue. The Washington Examiner reported in 2020 that both Cory Gardner, the Colorado Republican who then chaired the East Asia subcommittee of the Senate Foreign Relations Committee, and Senate staff were considering whether SpaceX’s NASA contracts “represent a potential national security risk due to Chinese financial support for the billionaire’s electric car company Tesla”.
“What’s to stop them from going directly to Musk and saying, ‘We’re going to cancel your credit early unless you give us X, Y, or Z? ” said “a Republican congressional staffer involved in negotiations over the sweeping legislation governing the space agency” to the Examiner. “And there’s no real clarity that there’s any kind of mechanism that will stop it, other than good behavior on the part of an individual.”
“How can America’s foremost leader in technological innovation not understand the risks of a deeper and more complicated relationship with the Communist Party of China?” asked Blaine Holt, a retired U.S. Air Force brigadier general and tech entrepreneur, in a comment to Gatestone. “Musk’s recent agreement requires future steps that the CCP must approve in order for Tesla’s goals to be realized. Musk should expect China to make demands for technology and data transfers that include Starlink and SpaceX heavy lift rockets.”
“China’s decision on April 28 to allow Tesla to use Baidu’s precise navigation mapping to enable full self-driving and thereby remain competitive in the Chinese market is Beijing’s way of building leverage over Musk,” Richard Fisher of the International Assessment and Strategy Center told Gatestone. “Meanwhile, Tesla’s relationship with Baidu is moving into the realm of Big Data and could potentially help Baidu with its AI ambitions, which could quickly have military ramifications for the People’s Liberation Army.”
Gardiner’s concerns are even more pressing at the moment. “Will Congress now look the other way as the CCP’s oft-used playbook on corporate blackmail unfolds and endangers our security?” asks Holt.
It is now time for a national conversation in the US about Musk’s ownership in both Tesla and SpaceX.
“You have me, and I have you,” Chinese Premier Li Qiang told Musk on April 28.
The words, ostensibly meant to show friendship between the US and China, were in reality a warning. It is now clear that a person so dependent on China should not be so central to America’s efforts to stay in space.
Gordon G. Chang is the author of The Coming Collapse of China and China Is Going to Wara Gatestone Institute distinguished senior fellow, and a member of its Advisory Board.
