TESLA IN THE TOILET: IS IT DUSK FOR MUSK?

Been Shanghaied

by Colin Liddell

What's up with Tesla? Why has its share price been sliding ever downwards? Just last week it shares crashed by another 12.4%. 

The real reason is that its previous highs were all fake.

Sure, Tesla has some good EV innovations, but it was always making something that other auto-makers wouldn't have too much trouble catching up with and overtaking. This was always obvious to anyone who crunched the data, so why the ridiculous overvaluation of Tesla, which, at one point, was worth more than the next 10 automakers?

It seems that the real reason is because the Chinese were helping Tesla reach those heady heights. One way they did this was to cut him a "sweetheart" deal so he could set up and expand his main factory in Shanghai.

Here's the NY Times listing the advantages of the plant initially set up in 2019:

The Shanghai factory has replaced Tesla’s plant in Fremont, Calif., as its largest and most productive, accounting for over half of the company’s global deliveries and the bulk of its profits.

As the plant took shape in just under a year, Mr. Musk worked closely with a city official who is now China’s premier, Li Qiang. Under Mr. Li’s watch, state-run banks offered Tesla low-interest loans, a deal so generous that a senior auto official recalled a minister balking at it.

China also changed ownership rules so that Tesla could set up without a local partner, a first for a foreign auto company in China.

Mr. Musk saves on production and labor costs in Shanghai and cannot easily extricate himself, should he ever want to. Because the billionaire's wealth is tied up in Tesla stock, his personal fortune now hinges on what happens in China.

When Musk bought Twitter less than two months after the Russian invasion of Ukraine, many were surprised, especially as he was paying well over the odds. But at the time, Musk could obviously afford it. But was this always part of the plan? The macroempirocal metadate suggests so. In the months that followed, Twitter became notorious as a major platform fast-tracking Russian and Chinese propaganda. 

At the time China and Russia were extremely closely aligned. In fact, just days before the invasion, Xi and Putin had declared a "no limits" partnership when Putin visited Beijing.

In addition to the brutal ground game in Ukraine, a big part of the Russian operation was clearly a meme and social media assault on the weakest link in the US, namely low-IQ and emotionally fragile Republican boomers. Having sympathetic control of at least one major social media platform was essential to this. With Musk they clearly got it. Backing Musk by giving him cheap labour in Shanghai seemed well worth it. 

But then the synergy between Moscow, Musk, and the Maoists started to come undone.

Part of the original plan hatched by Xi and Putin was for Russia to have a quick and easy "shock and awe" victory in the Ukraine. This, following on from the slightly messy withdrawal from Afghanistan in 2020, would make the US look weak, and undermine confidence in its security guarantees, hopefully putting Taiwan in a much weaker position. Xi's main goal was to create a situation where the island state would fall into his lap like a ripe apple. However, the war in the Ukraine actually pushed that prospect further away. 

While Russia has been able to grind out some minor advances this year with highly costly "meat wave" attacks and has defied economic sanctions by the "North-Korea-fication" of its collapsing economy, one area where Ukraine has had massive success is in defeating the Russian navy without actually having a navy of its own. In fact, some analysts have suggested that conventional navies are more or less obsolete in the age of sea and air drones. Whatever the truth of this conclusion, it is at least certain that a Chinese landing on Taiwan looks a hell of a lot more risky than it did before the Ukrainian war. Xi, as a election-proof leader, is quite happy to switch back to the long game.

As Xi has given up on Taiwan, so he has beaten a slow and stealthy retreat on his "partnership without limits" with Putin. With Taiwan off the table, the basis of Russo-Chinese synergy has collapsed. This also means that Xi no longer has the same incentives to back the Kremlin's main "covert propaganda tool" in the US, i.e. Elon Musk and his little empire, especially when this is leading to increased trade friction with the West.

Tesla now a bit player

This year expect a "kindler gentler" Xi to emerge, as he especially tries to thaw his damaged relations with the West in Europe. 

Meanwhile, Xi had another reason to give Musk a "sweetheart" deal in Shanghai, namely to jump start China's own EV industry, which is now undercutting Tesla and Musk's empire. That deal was a lot more bittersweet than a mid-wit idiot-savant like Musk realised. It is only a matter of time before Musk will have to dump Twitter to whoever will buy it. In fact, Twitter could very well be the next Truth Social.

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Colin Liddell is the Chief Editor of Neokrat and the author of Interviews & Obituaries, a collection of encounters with the dead and the famous. Support his work by buying it here (USA), here (UK), and here (Australia).