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Published: February 2020 (5 Min Read)

The Tesla share price has rocketed (apologies to followers of SpaceX) in recent weeks.

It is always difficult to explain precisely why share prices rise like this, but the most optimistic rumour is that Google might buy them for $250 billion (current valuation $138 billion at $767 per share). The rationale for such a deal is expressed here: https://www.nasdaq.com/articles/could-google-acquire-tesla-for-%24250-billion-2020-02-11.

We are not able to comment on the value of Tesla, because we simply don’t know enough about it, but it is interesting to look at what they have been doing in China. Quietly they have been making progress behind the headlines of trade wars, intellectual property theft and shutdowns caused by coronavirus.

The story started on 12th June 2014 when CEO, Elon Musk, announced, “Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology……

“Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.”(i)

Open sourcing Tesla’s intellectual property meant that Elon Musk had no conflict with China relating to industrial espionage.

Tesla signed a “cooperative agreement” with the Shanghai Municipal Government to build its third Gigafactory, and the first in China, in July 2018. They started building the facility in January 2019 and by October had been awarded a production licence by the Chinese Ministry of Industry and Information Technology. (ii)

The Shanghai Gigafactory is the first wholly foreign-owned car plant in China.

On 30th December, Tesla delivered the first cars produced by its Chinese Gigafactory, just under a year after the company broke ground on its Shanghai factory. The Model 3 vehicles were delivered to 15 of Tesla’s employees as part of a ceremony. The deliveries were made well within the schedule set by the company, which had previously said it wanted to begin delivering its Chinese-made cars before the Lunar New Year on January 25th.(iii)

The locally-produced cars already offer a large price saving over imported models, and a recent report said the company could lower prices further as it cuts costs and uses more locally-sourced components.(iv)

Chinese battery maker Contemporary Amperex Technology has reportedly reached a preliminary agreement with Tesla to become a battery supplier during 2020. They hope to sign a contract by mid-2020 to finalise volumes and other details. They are also mulling over expanding the partnership to global markets. A number of other local suppliers have been delivering parts already.

The Shanghai venture was financed by a syndicate of Chinese banks. Initially for one year, the loans have been rolled over for an additional five years.

The company is building out its retail and charging networks and delivered its first locally made cars to Chinese consumers on 7th January this year.

Sources
(i) https://www.tesla.com/en_GB/blog/all-our-patent-are-belong-you https://www.forbes.com/sites/briansolomon/2014/06/12/tesla-goes-open-source-elon-musk-releases-patents-to-good-faith-use/#72a3742d3c63
(ii) https://uk.reuters.com/article/us-china-tesla/tesla-gets-approval-to-start-manufacturing-in-china-idUKKBN1WW0NM
(iii) https://www.reuters.com/article/us-tesla-china-delivery/tesla-delivers-first-china-made-model-3-sedans-in-just-under-a-year-idUSKBN1YY04E?feedType=RSS&amp&feedName=technologyNews
(iv) https://www.bloomberg.com/news/articles/2019-12-18/tesla-considers-cutting-price-of-china-built-cars-next-year

 

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Article written by
Simon James