Tesla has put a pause on previously rumored plans to acquire 100 acres of land near Gigafactory Shanghai. Increased tensions between the U.S. and China were cited as the official reason.
China may have also created tensions with Tesla starting with the Chinese government banning Tesla vehicles from parking on government installations due to concerns that the onboard cameras could be used to capture footage of sensitive activities. Tesla denies that the cameras in question are activated.
CEO Elon Musk has attempted to smooth things over with limited success. Despite the tensions, Tesla says that it plans to complete its original construction plans for Gigafactory Shanghai. Even so, sales of its electric vehicles in China are dropping. Chinese customers ordered 25,845 locally manufactured vehicles in April, down from 35,478 units sold in March. The reduced sales in China may have been a factor in the recent dip in Tesla’s stock price.
Former president Donald Trump placed a 25% tariff on electric cars imported from China, a tax that has not yet been removed by the Biden Administration. Due to the tariff, most exports from the Shanghai factory were destined for the European market. Tesla is likely to restrict production in China for export until current diplomatic tensions can be resolved, though this may not hurt its ability to produce vehicles for the U.S. market very much.
It has operational Gigafactories in the Fremont and Reno areas and is currently constructing one near Austin, Texas, that will employ 10,000 people when it is ready to begin production. Tesla also has plans to build a fourth factory in a to-be-determined location in the United States.
China’s human rights abuses play a central role in the current tensions between the U.S. and China. There has especially been an upswing in awareness of China’s treatment of the Uighur Muslims in its territory, including forced labor and the alleged sterilization of Uighur women. Other issues include China’s tightening control over Hong Kong and alleged use of Chinese companies like Hauwei to conduct spying operations in the United States.
Tesla is currently pursuing a libel suit against a Chinese media outlet that retaliated against the United States’ allegations by accusing Tesla of using “sweatshop” conditions at Gigafactory Shanghai. Although Tesla is notorious for being anti-union and has previously fought legal battles with former legal employees, including winning a recent case in which a former employee claims that he leaked information to the press in the hope of raising awareness of unsafe working conditions at the Reno factory. The court ruled that the employee violated Nevada’s cybersecurity laws by doing so.
Elon Musk is also currently appealing a regulatory ruling ordering him to take down a 2018 tweet threatening to revoke stock options if employees voted to unionize, the company denies stooping to the use of sweatshop-like conditions.
Gigafactory Shanghai currently conducts the final assembly of the Model 3 and recently began manufacturing operations for the Model Y. It may hope that the pause on acquiring the 100 undeveloped acres near the factory site is only a temporary one, although China has recently been highly critical of the U.S.-based company.