Published on March 13th, 2018 | by Steve Hanley0
Shanghai Says All Is Well With Tesla Talks, Marchionne Says Mistakes Were Made
March 13th, 2018 by Steve Hanley
You might think Elon Musk’s Twitter tantrum last week put the kibosh on any plans Tesla may have to build a factory in China, but officials in Shanghai tell Reuters that talks with Tesla are progressing amicably. They say Shanghai and Tesla have “a shared goal” to move the electric car revolution forward in China.
In an email to Reuters, the city said, “Both sides will keep looking thoroughly at plans in China. Currently the details are still under discussion, once anything is confirmed we will announce it as quickly as possible. As Tesla CEO Elon Musk has said openly before, Tesla attaches great importance to its development and plans in China.” The Chinese are masters at maintaining a polite face even if they are seething inside.
Musk And Neo-liberalism
Last week, Musk appeared to support the alleged president in his push to upend the existing “free trade” neo-liberalism that has spread across the globe since the NAFTA treaty was signed in 1994. China in particular has resisted the free trade movement, even though it has been the primary beneficiary of it. It could be argued that neo-liberalism has been one of the major factors that made it possible for China to become the economic powerhouse it is today.
Musk compared competing with China to participating in the Olympics wearing lead sneakers. What particularly rankles him is China’s requirement that any foreign corporation that wants to build a factory in China must partner with a local Chinese company. “Partner” may not be the right word. In practice, the foreign company can only own 49% of the joint enterprise while the local partner owns 51%. You don’t have to be a mathematical genius to see that 1% difference makes all the difference in the world.
Nevertheless, China has the largest new car market in the world. Any company that wants to be called a global auto manufacturer has to be part of that. It’s a “put up or shut up” situation and apparently Tesla has chosen to put up with the Chinese rules because it has no choice.
Marchionne Singing A Different Tune
Another company that has no choice is Fiat Chrysler. Led by the mercurial Sergio Marchionne, FCA has thumbed its nose at electric vehicles for the past 7 years or so, preferring to invest its time and money in building large gas-guzzling vehicles like the Ram 1500 and Grand Cherokee. At one point, Marchionne even begged people not to buy the Fiat 500e, the only all-electric car his company builds, because the company “loses” $14,000 on each one it sells.
Just a few months ago at the Detroit auto show, Marchionne said that electric cars are not worth the investment, according to the Detroit News. “These proclamations that we hear about the advent of electrification and artificial intelligence and the inevitable association of artificial intelligence with electrification are all things which at best are conjecture. So making an announcement at the Detroit auto show that we’re going to have X-number of vehicles that are electrified in the future … is that a wise economic thing to say? The answer is probably ‘no.’ ” Last fall, he called electric cars a “global threat.”
But in Geneva last week, Marchionne had changed his tune. “In China, for example, we have made a number of mistakes in the past and underestimating new energy vehicles in the market has been one. We are looking at that,” he said to Just Auto. Asked about the Chinese market, Marchionne replied, “The Chinese are interested in Europe, why wouldn’t they be? It’s only reasonable that people want to forge alliances to gain access to markets and we have seen a number of moves towards aggregation to reduce costs. I am not negative about Chinese investment, investors are always coming into the market. I have had meetings with Chinese companies but just because we have meetings does not mean we are about to cut a deal.”
FCA sells Jeeps in China and surely understands the market in that country. China has put aggressive electric car quotas in place, quotas that FCA will have to meet if it wants to continue doing business there. The amazing thing is that Marchionne gets paid handsomely to screw things up royally. Hello, FCA board members? I can do a better job than Marchionne and I will do it for half what you are paying him. Call me. I’m in the book.