Elon Musk on collision course with China’s future

What a difference 11,000 kilometers make. Elon Musk may be thinking just that as Tesla shares surge on the power of the billionaire flying to Beijing from Austin, Texas.

Sure, Musk claims to have cleared some regulatory hurdles to roll out his driver-assistance system in the globe’s biggest auto market. According to press reports, Musk struck a deal on navigation and mapping software with Baidu Inc and met some requirements on data security. That, after he met with “old friend” Li Qiang, China’s premier.

Yet investors giving Musk’s unstoppable force ethos the benefit of the doubt are forgetting two immovable objects standing in Tesla’s way. One, the wave of new Chinese electric vehicles (EVs) with lower sticker prices than Musk could arguably offer. Two, the specter of another Donald Trump presidency.

The first challenge is among the reasons Tesla shares are still down 22% this year. The fingerprints of China’s growing threat are all over why, “since late 2023, sentiment on Tesla has deteriorated,” says John Murphy, an analyst at Bank of America.

JPMorgan analyst Ryan Brinkman notes that “the sweeping layoffs” Tesla announced in mid-April which “amount to a reduction in crewed production capacity, should now leave no doubt that the decline in deliveries has been a function of lower demand and not supply.”

Never mind brutal reports of the disastrous rollout of Musk’s long-awaited Cybertruck, with its “trapped pedal” defect going viral on social media. Even after the “nightmarish price cuts” Musk announced in mid-April, “the full extent” of the problems they represent “aren’t being fully appreciated by Mr Market,” says Gordon Johnson, analyst at GLJ Research. He calls Tesla “the best short-play in the stock market today.”