After riding 3.8% higher yesterday on news of a factory expansion in Texas, and a new factory that the company might build in Indonesia, Tesla (TSLA -2.02%) stock is giving back about half of yesterday’s gains. It was down 1.8% as of 12:25 p.m. ET on Thursday.
Expanded production capacity in the United States and Southeast Asia is good, but China remains Tesla’s production powerhouse, with the Shanghai factory where Tesla builds more electric cars than anywhere else.
According to the company’s published plans, Shanghai was supposed to play an even bigger part in Tesla’s production strategy, with a stage three expansion scheduled to begin in mid-2023 that would lift production capacity of the factory to 2 million cars per year.
But as Bloomberg reported this morning, China’s government has concerns about Elon Musk selling Teslas in China while he also operates a Starlink satellite network that might receive data from these Teslas — potentially in violation of the country’s data export laws.
Bloomberg points out that Tesla cars are not currently equipped with Starlink receivers or transmitters, and so cannot transmit data to Starlink. Regardless, it seems the government is holding up approval of Tesla’s Shanghai expansion, citing these data concerns as a reason.
Are China’s concerns valid? Possibly. Just because Teslas aren’t connected to Starlink now doesn’t mean that they won’t be connected eventually. On the other hand, China could be just making up objections as a means of pressuring Tesla for concessions on other points: to demand technology transfer, for example, or to otherwise gain more control over Tesla’s China business.
Whatever the reason for this new delay, it illustrates the risks of one man — Elon Musk — having interests in so many companies (Tesla, SpaceX, Starlink, and now Twitter) that China is also interested in. In theory at least — and maybe now in practice — any one of these companies can be used by China’s authoritarian government as a cudgel to force concessions from the other companies.
And since Tesla is presently the only one of these companies that is publicly traded, it’s Tesla stock that’s going to suffer anytime this happens.