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U.S. congressional committee on China have expressed concern about Tesla’s business deals in China, with the U.S. House of Representatives Select Committee on Foreign Affairs chairman, Mike Gallagher, asking for more information about the company’s reliance on China, Reuters reported.
Tesla plans to set up a battery factory in Shanghai that will initially produce 10,000 Megapack units a year, equal to around 40-gigawatt hours of energy storage. It will complement Tesla’s electric vehicle plant in China.
Gallagher expressed his concerns about Tesla’s dependency on the government’s tax breaks and the Chinese market.
“Tesla seems entirely dependent, A, on the largesse of the federal government via tax breaks, and B, upon access to the Chinese market,” Gallagher said.
Tesla has previously faced scrutiny for its business dealings in China, including allegations that it used forced labor to produce electric vehicle batteries. However, the company has denied these allegations and is committed to ethical sourcing practices.
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China is Important for Tesla
China is a massive market for Tesla’s electric cars, which is why the latter is expanding its operation in the country. Tesla’s revenue from China clocked over $18 billion last year, amounting to more than 20% of the total revenues generated by the company. With China’s EVs demand increasing and Tesla expanding its front print in the Asian country, the dependency on sales in China will likely increase shortly.
U.S.-China Trade Conflict
The concerns expressed by U.S. lawmakers come at a time of heightened trade tensions between the U.S. and China. The problems started during former President Donald Trump’s era with additional Chinese aluminum and steel duties. Both superpowers sparred for some time with reciprocal actions of similar nature. The situation even led to a complete ban on Huawei in the U.S.
However, President Joe Biden took it a step further by slapping strict bans on certain chip technologies export to China, and the transfer of associated human resources, technologies, and machinery to China, something that can adversely affect the Asian giant for a few years to come given the importance of microchips in this day and age.
The whole scenario can get ugly, particularly for Tesla, if the trade tensions directly impact the EV maker. However, the situation is unlikely in the foreseeable future, yet the company should proceed with caution.
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