Tesla Gets Caught In EU-China Crossfire

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As it cracks down on China-made electric vehicles, the EU isn’t just rounding up the usual suspects. The probe will ensnare big international names as well, including BMW, Renault, and EV superstar Tesla, which all export EVs from China. Elon Musk might need to break out some diplomatic skills soon.

The EU’s antitrust investigation claims that China is artificially flooding the market with cheap EVs via enormous state subsidies. An EU official told the Financial Times on Tuesday that the probe applies to any company that exports EVs from China.

Unmade In China

For Tesla in particular, its China operations are a crucial part of its logistics network. Tesla’s Shanghai plant is its largest by output, accounting for half of the company’s global deliveries in 2022. Per data provided to Bloomberg by Schmidt Automotive research, 47% of the vehicles Tesla sold in Europe during the first seven months of this year came from Shanghai.

With some vigorous re-jigging Tesla could turn this into an opportunity. Unlike its China-based rivals, Tesla has a European plant, opening the Berlin Gigafactory in March 2022 after various delays. Though the factory is operating and helped Tesla overtake Volkswagen in European EV sales, it’s not fully ramped up yet:

  • Expansion plans submitted by the company in July show it wants to double vehicle production capacity at the Berlin factory to 1 million cars per year. It’s worth noting that the plant doesn’t currently produce the 500,000 cars it’s capable of making annually.
  • The Berlin plant only makes the Model Y, so reconfiguring it to produce other models like the Model 3 would be a heck of a sprint. The Berlin Gigafactory has also struggled with understaffing issues, Wired reported in December.

Tesla might have time on its side, however, as it’s uncertain how long the EU probe will take. “We believe bark is worse than the bite here,” Wedbush analyst Dan Ives told The Daily Upside, adding: “we see a contained impact to Tesla from this latest EU issue with the can kicked down the road into 2024.” By then, Tesla might be building a whole new factory somewhere.

Imitation is the Highest Form of… Nevermind: Another automaker re-thinking its China tactics is Ford. Per a report from The Wall Street Journal, Ford attempted to mimic Tesla’s strategy of selling direct to consumers in China, but has found precious little success.

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