Tesla’s operations in China are gaining attention due to recent statements from CEO Elon Musk. Musk refuted claims that Tesla might end its operations in China amid talks of a merger with SpaceX. In a post, Musk labeled The Wall Street Journal’s article as “absurdly fake news,” affirming that Tesla’s departure has “not even come up in discussion ever.” Attempts were made by Newsweek to secure comments from both SpaceX and Tesla.

Significance of China to Tesla

Any transaction involving its China business would considerably impact Tesla and the market it serves. China is the world’s second-largest economy and Tesla’s second-largest market, facing competition from Chinese electric vehicle companies like BYD and XPeng. These competitors offer lower-priced models and features at a quicker pace.

Between April and June, Tesla posted $4.7 billion in revenue from China, constituting about 17% of its quarterly revenue. China represented more than half of Tesla’s global vehicle deliveries in the previous year.

Beyond Electric Vehicles

Tesla achieved a milestone with its Shanghai factory, Gigafactory Shanghai, which opened in late 2019 as China’s first wholly foreign-owned car manufacturing facility. This development provided access to mature electric vehicle supply chains, helping reduce production costs, shipping expenses, and tariffs on imports. Consequently, Shanghai became Tesla’s primary export hub, distributing vehicles to Asian and European markets.

Tesla’s aspirations in China extend beyond electric vehicles. The company invested approximately 1.4 billion yuan (around $200 million) to establish the Shanghai Megafactory, beginning production of Megapack grid-scale battery systems. These systems store electricity for utilities, enhancing energy management and marking energy storage as a growing segment of Tesla’s business.