Tesla Pushes White House To Pressure China Into Easing Restrictions On U.S. Automakers

SEP 2 2015 BY MARK KANE 51

Youxia X (image: CarNewsChina.com)

Youxia X (image: CarNewsChina.com)

Tesla Motors is complaining about the Chinese restrictions on US carmakers and is asking th White House for help in form of “pressure Chinese President Xi Jinping to make it easier for U.S. automakers to operate in China, during his state visit to the U.S. next month.”

According to the article, foreign manufacturers need to pick joint venture partners to assemble vehicles in China. This is important due to taxes and incentives for New Energy Vehicles, we believe.

On the other hand, Chinese companies in US don’t have such restrictions.

The second part of the article is about new players emerging in China, which could compete with Tesla, like Youxia Motors’s Youxia X or the just-announced LeTV electric car. If any of them succeed in China, it’s likely due to the fact that Tesla is not on equal grounds with these companies because of Chinese restrictions against U.S. automakers.

Who would not like to see free trade market these days?

With large companies like General Motors giving in to China’s restrictive practices, we expect Tesla to have to follow suit at some point soon, but for now Tesla is pushing for a resolution, rather than joining the bandwagon.

Here is what happened with Nissan LEAF in China:

Venucia e30, locally made by Nissan and Dongfeng JV

Venucia e30, locally made by Nissan and Dongfeng JV

Source: International Business Times

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51 Comments on "Tesla Pushes White House To Pressure China Into Easing Restrictions On U.S. Automakers"

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Speculawyer
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Speculawyer

Maybe Donald Trump can do the deal? 😉

(Oh, please, no!)

Counter-Strike Cat
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Amerika restricts sales of Chinese solar panels with extra taxes, so better don’t point the finger at the others.

ItsNotAboutTheMoney
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ItsNotAboutTheMoney

America doesn’t say “to sell solar panels here you have to hand over your IP to our country”.

There are other protections to point fingers at, but a tariff (and on solar panels in particular) isn’t one of them.

Londo Bell
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Londo Bell

So, are you saying that 2 wrongs (or 2+ wrongs) make 1 right?

In the pv case, both sides are wrong, especially since both countries are members of WTO.

In the case of automobile, China is definitely in the wrong. However, as the editors have pointed, the big guns have all given in, so best of luck to Tesla there.

sven
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sven

The American restrictions on Chinese PVs are the result of the U.S. winning a WTO case against China where the WTO ruled that Chinese PV panels were made with unfair/illegal government subsidies.

Anon
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Anon

They were found guilty of dumping panels below cost, to drive everyone else out of business.

Pushmi-Pullyu
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Pushmi-Pullyu

Exactly. Anyone defending China on this point is either ill-informed, or is parroting Chinese propaganda.

ModernMarvelFan
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ModernMarvelFan

Apparently, Solar City loved Cheap Chinese panels…

Fool Cells
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Fool Cells

You mean America is defending itself from Chinese dumping of solar panels? LOL, drink kool-aide much?

Rich
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Rich

The Chinese gov. subsidized 50% of the Chinese solar manufacturers costs allowing Chinese solar panels to gut the market. Remember Solyndra. It’s funny that no one talked about Chinese subsidies gutting the USA market but they had plenty to say about a loan to a USA clean energy company.

PVH
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PVH

Sure this will have an influence on the Chinese, it is amazing all what can be achieved by just asking…

sven
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sven

“Who would not like to see free trade market these days?”

China.

What was the point of allowing China into the WTO if China is allowed to have these draconian restrictions on imported U.S. vehicles and other U.S. products. It’s high time the U.S. and European countries file a WTO complaint against China with regards to restrictions on foreign automakers.

ModernMarvelFan
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ModernMarvelFan

Isn’t those terms allowed under WTO for “developing nations”?

They are pre-negotiated terms before China entering WTO.

So, if it is against the rule, then US trade panel can challenge it at WTO court. If it is NOT, then Tesla or anyone else got no cases even if they want to ask White house to intervene.

That is how WTO works. If you wanted China to change auto market rules, then you should have pre-negotiated it in the first place.

Now, how about Japanese automarket protection? How come nobody is dealing with that? Too small?

Pushmi-Pullyu
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Pushmi-Pullyu

The inability of American auto makers to penetrate the Japanese market has more to do with failure of American auto makers to appeal to Japanese drivers than any Japanese protectionism. For example, how many American auto makers offer right-hand drive vehicles? Japan is a right-hand-drive country.

And the Japanese don’t pressure foreign companies into agreeing to give up their most valuable trade secrets (IP) as the cost of doing business in Japan, as the Chinese do.

When Japan wins a trade war, it does so by being industrious and inventive. China does so by spying, by entrenched corruption, and by cheating their customers. The difference there is night and day.

DonC
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DonC

If you believe that I have a bridge to sell you. Very hard to believe that US automakers can compete in every country in the world but one.

Pushmi-Pullyu
Guest
Pushmi-Pullyu

I look forward to your excellent offer of a toll bridge, altho I must warn you that I’m rather dubious about the one in Brooklyn. 😉

From the Automotive News website: “Why GM struggles in Japan”

http://www.autonews.com/article/20140831/GLOBAL02/309019963/why-gm-struggles-in-japan

Now, DonC, this isn’t a binary, either/or situation. To argue your side of the case: In Japan, the government backs and funds private industry much more than is the rule here in the USA. But then, you could say that about nearly every first-world country other than the U.S. of A. We Americans expect businesses to succeed or fail without government intervention… and there is a lot of public outcry over the rare exceptions, such as the bailouts of GM and Chrysler.

But read the article linked above. There are a lot of reasons why American cars don’t sell well in Japan, and the excuses Detroit offers are at best only a rather small part of the entire picture.

ModernMarvelFan
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ModernMarvelFan

I have read the link you provided, thanks.

Although it does have a valid point of lack of effort, it is a chicken/egg problem. If the market is relatively small or low profit but hard to win over, then the ROIC would be much smaller.

Now, some of the point raised are kind of “wishy washy”. It said that GM’s Australia’s division has RHD cars, but they are too big. Then they complain about Cadillac don’t have RHD cars? Last time I looked, GM’s Holden cars are in the same size class of Cadillacs!

Then it went on and complained about Chevy only have 2 models but the entire Vaxhaul/Opel line have plenty of RHD models. But it complained that “crowded small car market” is harder to compete which AKA low profit. That will result in low effort.

ModernMarvelFan
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ModernMarvelFan

Pushmi-Pullyu wrote: “For example, how many American auto makers offer right-hand drive vehicles? Japan is a right-hand-drive country.”

I would say that you have some point of on the merit of US auto quality. But to say that US automakers don’t make RHD cars are totally off the base since both GM and Ford make RHD cars for UK, Australia and South Africa, it wouldn’t be a big deal for them to ship the same models to Japan. If they are competitive in those market, then they can be competitive in Japan as well as far as RHD is concerned.

Pushmi-Pullyu
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Pushmi-Pullyu

I see this as a matter of opinion, not fact. Is the lack of U.S. auto sales in Japan due to the Japanese not “playing fair” — fair from the American viewpoint, not theirs — or due to lack of effort on the part of American auto makers?

It’s some of both. The only reasonable question is just how much of which. I think this is one place where it’s reasonable to have differences of opinion. It’s natural that Detroit wants to blame Japan for the situation, and there’s some truth to the claim that Japan makes it difficult for outsiders to compete. But that’s certainly not the only reason.

Please read the article I linked to. I won’t claim that’s the one-and-only valid viewpoint; I see it more as an opinion piece than an authoritative declaration of fact. But it’s a viewpoint at least as valid as what Detroit is saying, and I think a more balanced one.

ModernMarvelFan
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ModernMarvelFan

Whether RHD models makes the difference in Japanese market or effort by automakr is a matter of opinion. But your original question of RHD offerings is a fact.

DonC
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DonC

Apparently not:

“US officials said the WTO panel had ruled in its favour “on nearly all” points, establishing that China had improperly determined that US exports had caused injury to Chinese businesses and had improperly analysed the impact of US cars on domestic Chinese prices.”

http://www.ft.com/cms/s/0/25c785ee-e222-11e3-915b-00144feabdc0.html#ixzz3kbpdhDhf

ModernMarvelFan
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ModernMarvelFan

If that is the case, then US trade panels have a legit case to sue China in the WTO court.

ffbj
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ffbj

I don’t think China is good at being told what to do. They do like to to tell others what to do though. Anyway in the current environment where the Chinese government has essentially ‘screwed the pooch’ (pardon the expression), when it comes to their stock market, and their economic manipulations and machinations, I doubt they are in a very amenable frame of mind concerning fairness to foreign automakers.
Although Tesla has a point in that they are not like other automakers as they only sell evs.

ModernMarvelFan
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ModernMarvelFan

The difference is that Chinese automarket is very large and highly lucrative on the high end of the market, but razor thin on the low price or mid price section.

Government tariff raised the price of cars for consumer which in turn drives up the profit margins of the Chinese domestic automakers so they can properly develop and compete against foreign automakers in the long run. It is a strategically designed system to allow Chinese automakers to survive.

But the problem with that protection system is that Chinese automakers will “live under the protection” system without innovating as fast as they need to (survival) to compete against world’s best. Sort like what Detroit is doing but worse.

Pushmi-Pullyu
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Pushmi-Pullyu
There are other serious problems with the Chinese auto industry. Protectionism in China doesn’t just keep out foreign competition; there is even regional protectionism, with the various Provinces using red tape to keep out products made in other Provinces. This has contributed to a situation where there are a lot of very small auto makers in China, with none able to grow to the size of, say, Chrysler or Ford, let alone GM. This has hampered China’s ability to compete on the international market. I think it was about two years ago when the Chinese central government moved to stop or at least mitigate this situation by simply mandating that about 90% of all Chinese auto manufacturers cease operation… to go out of business. Sounds crazy, but realize that these were all tiny companies with little or no opportunity to grow. But I’m not at all sure that was a permanent solution. It’s hard for Westerners to peer behind the “bamboo curtain”, but from what little I can gather it seems that new Chinese auto makers are popping up as fast as ever. It looks like BYD has been able to transcend that limitation and grow into a company that… Read more »
Pushmi-Pullyu
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Pushmi-Pullyu

I wish that I could believe that Tesla’s lobbying could actually influence Washington to get serious about playing hardball with China over its excessive tariffs and protectionist red tape, which it uses to keep foreign competition from penetrating the China market.

Unfortunately, I have no such hope. Let’s be realistic: We have a weak negotiating position so long as we keep borrowing more and more money from China to fund ongoing U.S. federal deficit spending. It’s hard to play hardball when you’re behind the 8-ball!

Fool Cells
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Fool Cells

not to mention how much money the politicians are making off selling out America.

DonC
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DonC

I’m really so tired of this BS about China holding US debt. Most US debt is held by US citizens and the biggest holder of US debt is Japan not China.

Who cares if China stops selling and starts buying US debt? The interest rate on the 5 year note is absurdly low at 1.5%. So what if it rises to 1.6%. China has been selling and will continue to sell US debt because its economy is a mess and it needs the dollars to stabilize its currency and to pump more money into its zombie factories.

Pushmi-Pullyu
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Pushmi-Pullyu

DonC ranted:

“I’m really so tired of this BS about China holding US debt. Most US debt is held by US citizens and the biggest holder of US debt is Japan not China.”

You know, DonC, I was very specific: I mentioned only borrowing to cover U.S. federal deficit spending. You’re talking about U.S. debt in general, which is mostly private debt. Not just U.S. federal government debt.

But even in the more general case, you’re still wrong:

From CNN Money, May 2015: “China retakes spot as biggest holder of U.S. debt”

http://money.cnn.com/2015/05/18/news/economy/china-us-debt/

Saudi Arabia is another big stakeholder in loaning money to cover U.S. federal deficit spending.

ffbj
Guest
ffbj

If they keep selling treasuries like they have been lately they might fall to 2nd place soon.

One good result of their masterful moves in and out of the markets, is that the drumbeat for the silly idea of making the reminbi a reserve currency has probably been quashed for good.

Pushmi-Pullyu
Guest
Pushmi-Pullyu

Sure, China will likely fall to second place again, and likely soon.

But all this is kinda irrelevant, innit? Whether China is the #1 or #2 or #3 holder of U.S. government debt isn’t really important, except for score-keeping. What matters is if they hold enough debt to seriously weaken the U.S. government’s bargaining position in trade negotiations.

I don’t see that situation changing soon.

ModernMarvelFan
Guest
ModernMarvelFan

debt holding doesn’t impact trade agreement. Trade Deficits and investment restrictions do.

China uses its market size and potential as bargaining chip.

If China limit US exports, US company suffers. If US limit Chinese exports, then both Chinese and US company suffer since US company products are made in China as well.

ModernMarvelFan
Guest
ModernMarvelFan

Biggest “foreign” debt holder != biggest debt holder.

sven
Guest
sven

I’d love to see the day when the federal government starts saving more than it spends, pays off the federal deficit, and starts a sovereign wealth fund with its excess revenue like Norway, or the UAE.

ffbj
Guest
ffbj

The dawn of that day will never be seen.

ModernMarvelFan
Guest
ModernMarvelFan

Highly educated democracy with socialist government or an “authoritarian” government? =)

Both highly depends on oil related exports?

Fool Cells
Guest
Fool Cells

Very simple. Enact the same restrictions on Chinese products as they enact on ours. Done.

sven
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sven

I’d like to see a tariff imposed on imported goods from countries that have very lax or non-existant pollution/environmental controls, which results in a lower cost of production than in U.S. and the outsourcing of production from the U.S. to that lower cost, higher polluting country.

ModernMarvelFan
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ModernMarvelFan

Since Chinese doesn’t sell any cars to us, it is kind of hard to retaliate on auto segment.

Plus, the point of WTO is so countries can work out their “differences” in court instead of in the media with common people’s opinions involved.

DonC
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DonC

Kudos to Tesla for bringing up the issue. China is a pit for foreign companies. Unless the Chinese change there is little chance to make much profit and the Chinese will literally steal the IP.

As it stands, I believe that if you manufacture in China you have to give your Chinese partner the IP to either the battery, the power electronics, or the motors.

I think we should slap a big tariff on all vehicles from China for the same period as these onerous restrictions are placed on US companies.

Pushmi-Pullyu
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Pushmi-Pullyu

…and we should also be slapping China with tariffs as payback for China doing so much industrial espionage to steal company trade secrets. China even uses its military intelligence services to spy and hack trade secrets from private companies! Not just American companies, either. The Chinese aren’t prejudiced; they’ll steal from anyone.

ModernMarvelFan
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ModernMarvelFan

The day that they stop copying from us is the day that we should be really worried…

ModernMarvelFan
Guest
ModernMarvelFan

Well, Tesla certainly doesn’t care about its IP as long as they are using it to make EVs. That is at least what Elon “proclaimed”.

If Chinese is copying Tesla Model S, then Elon should be getting what he wishes…

Pushmi-Pullyu
Guest
Pushmi-Pullyu

If Chinese companies do to Tesla what they did to Apple… open stores using the Tesla logo, selling counterfeit Tesla cars… then Elon Musk certainly won’t be getting what he wants in selling cars in China.

Elon Musk says he welcomes competition. Maybe he really is that altruistic, maybe not. I can’t see into his heart, nor can anyone else. But whether or not Elon actually cares about Tesla’s patents, you can be sure he does care about some other company using the Tesla logo to promote sales of counterfeit goods, and damaging Tesla’s reputation by selling inferior products which consumers will identify with the Tesla logo.

ModernMarvelFan
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ModernMarvelFan

“If Chinese companies do to Tesla what they did to Apple… open stores using the Tesla logo, selling counterfeit Tesla cars… ”

But that is NOT what happened. Chinese companies opened “fake Apple” stores to sell REAL Apple products. Why? Because demand outstrip supply by magnitude due to the fact that Apple don’t address Chinese demand with Apple products through the real channel on tier1 cities.

If Apple had opened real stores in all those tier2 cities with real stores, then there wouldn’t be a fake store that sell real Apple Phones.

Why do those “day traders” walk over to HK to buy a tons of Apple product and then try to sell for a large profit over the border? Because demand exceed supply by magnitude.

ModernMarvelFan
Guest
ModernMarvelFan
DonC wrote: “I believe that if you manufacture in China you have to give your Chinese partner the IP to either the battery, the power electronics, or the motors.” Actually that is NOT true. The rule was that if the PEV wants to qualify for Chinese Goverment EV purchase incentivs and lower import tariff, then the PEV needs to transfer 2 out of the 3 key technology to its Chinese partners in building the car in China. That was the problem that GM faced with the Volt. Volt doesn’t qualify for any of the high Chinese government incentives that other PEVs in China enjoy since GM refuses to share at least 2 out of 3 key Volt technology with its Chinese partners in order to qualify for the highly lucrative government incentives. That is also why Volt cost nearly $80K in China instead of $40K in the US. If you don’t want transfer, you can still build cars in China. It will waive the import tariff, but won’t allow you to qualify for all the government incentives (high amount of cash incentives). It is almost like if the PEV isn’t built in the US with US technology or transferred technology,… Read more »
jmac
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jmac

Official, appointed negotiators cheat and connive to gain trade advantage for their own nations in trade talks. nations enact protectionist laws to keep out foreign trade and competition.

Everybody does it, including the good old U.S.A. A good example might be the U.S. 25% chicken tax tariff on imported pick up trucks.

The U.S. cheats. China too.

And… ready or not… so does Japan.

ModernMarvelFan
Guest
ModernMarvelFan

Everyone plays the trade rule bending game. That is why WTO is created so everyone can play within the same sets of rules.

It is almost like NFL. You got to be the member before you can play the game.

What you hear about in the media are just politics which people use to achieve their own goal.

In China, you hear about how US products breaches Chinese trade rules and of course we heard the same thing on Chinese goods here… It is all part of the bigger government game to keep all the people “employed” or “unemployed” and under control (at least distracted).

Pushmi-Pullyu
Guest
Pushmi-Pullyu

“Everybody does it, including the good old U.S.A. A good example might be the U.S. 25% chicken tax tariff on imported pick up trucks.”

“The U.S. cheats. China too.”

You have a point, and that’s one reason why I am uneasy about my own rather sharp criticisms of Chinese business practices. Perhaps they come across as racist “Yellow Peril” rants.

But in my opinion, this isn’t merely a matter of degree. The Chinese way of doing business isn’t merely “sharp trading”, of which U.S. companies certainly are certainly guilty.

The real problem, as I see it, is this: Chinese business practices include (1) cheating the customer wherever possible, and (2) of almost completely ignoring patent and trademarks, to the point that China has become notorious for making electronic parts that even the real manufacturer has a hard time distinguishing from the legally made ones.

This is damaging to the very fundamental economic principle of trade benefiting both parties. When one party repeatedly, almost consistently, cheats the other party, then why would anyone continue to trade with them?

This is why I don’t understand why there hasn’t been an international coalition of countries imposing stiff tariffs or even outright import bans on Chinese goods.

ModernMarvelFan
Guest
ModernMarvelFan

“The real problem, as I see it”

A pretty ugly stick that sweeps across the entire business world. I guess since you read on the internet, therefore it must be true that “EVERY SINGLE” Chinese business are exactly the same… Good job at over-generalizing.

ModernMarvelFan
Guest
ModernMarvelFan
“China has become notorious for making electronic parts that even the real manufacturer has a hard time distinguishing from the legally made ones” That is because they are made from the same factory that supplies the same legal parts. My company actually been hit many times by counterfeit good that we sources from buyers in SE Asia that bought supplies from China so I have a bit of experience on that. In general the counterfeit goods come in different class: Class 1: Excessive production from the legit factory that supplies brand name products without authorization sold at lower price. This is the “best kind” of good for buyers and consumers. Class 2: Factory rejects from legit factory that has minor defects that should have been destroyed but didn’t and sold on the “black market” for huge discount. Class 3: Stolen IP from legit supplier to brand name product factory by former employee that are often 1 generation behind in design or slightly lower in quality but much cheaper. Class 4: Stolen IP made by factory that has no relations to the original legit factory which might or might NOT meet original specification since the illegal operation don’t have the proper… Read more »