Tesla Inc. isn’t worried about political and trade tensions between the U.S. and China, with the automaker’s Chinese-born head of global production Tom Zhu saying its Shanghai operations should be fine as long as the company keeps providing a good product and creating jobs.
Zhu, making his first public appearance since moving from Shanghai to Tesla’s Austin headquarters late last year, was put on the spot after CEO Elon Musk threw him an analyst’s question at the company’s Investor Day about plans to increase market share in China and tensions between the world’s two biggest economies.
“We created a lot of jobs with the factory and our suppliers, and contribute a lot to the local community,” Zhu said. “As long as we are needed in the country, I don’t see there’s much of the risk.”
As further proof of that, he also extolled the virtues of Tesla’s heavily localized supplier network in China, in contrast to other companies such as AirPods maker GoerTek Inc. that are diversifying away from the country amid the political tensions and after being burnt during China’s strict COVID Zero lockdowns. GoerTek is investing an initial $280 million in a new Vietnam plant while considering an India expansion, with U.S. tech companies in particular pushing hard for suppliers to explore alternative locations.
More than 95 percent of the suppliers to Tesla’s Shanghai factory are local, Zhu said. The company also employs over 30,000 people in China, and less than 20 expats, he said. “We try our best to localize and I think that absolutely gives us an advantage to compete with the all the OEMs around the globe.”
After initially enjoying a red-carpet welcome in China — including being the only foreign automaker allowed to wholly own its local operations and receiving support for its factory near Shanghai — Tesla endured a series of setbacks, highlighted by a protest by a disgruntled owner at the Shanghai auto show almost two years ago, and a spate of crashes and regulatory scrutiny of safety, data and customer service issues.
Just this week, a columnist at one of China’s key state-run newspapers warned Musk against perpetuating the theory that COVID-19 leaked from a laboratory in the country. And earlier this year, an expansion of the Shanghai plant was earlier reportedly delayed over data security concerns.
Zhu also shrugged off any concern about demand amid growing competition in China from the likes of Nio Inc. and BYD Co., which are expanding their lineups of electric cars. Tesla earlier this year slashed prices and previously offered a slew of incentives in China, stoking concern that demand was waning.
“As long as you offer a product with value at an affordable price, you don’t have to worry about demand,” Zhu said. This year’s price cuts generated “huge demand” that was more than the company could produce, he said.
The automaker shipped more than 710,000 vehicles from Shanghai in 2022, or about 52 percent of its worldwide production.