4 reasons why Beijing is courting Elon Musk...again

Hi, hi everyone. Welcome to Lazero Talk. Good evening, good morning, happy Tuesday. It's the start of the week. I hope everyone has had a great weekend. All right, it's the last day of April. Okay, so four reasons why Beijing is courting Elon Musk again. On Sunday, Elon Musk surprised us by visiting China for a 24-hour short trip. He met with China's premier, Li Qiao. And Li was party secretary of Shanghai when Musk was in China negotiating with the Shanghai government for his Gigafactory. And so this was their sixth meeting. And the meeting was heavily promoted by the Chinese state media and extensively reported by Western media. So today let's talk about, let me first give you a summary of his trip to China. And then I'll talk about the four goals Beijing has in trying to court Elon Musk again. All right, so the meeting was important to both parties, was important to Musk and Beijing and CCP. For Musk, he canceled his scheduled trip to India on April the 22nd to go to Beijing. And unlike his previous visits where he would typically go to Shanghai first, he flew directly to Beijing and met with the premier on the same day. I'd explained in my last live stream this Saturday why Janet Yellen and Anthony Blinken went to Guangzhou and Shanghai first before going to Beijing. So if you watch that live stream, you will know why. And also in reference to that same video in which we discussed the significance of floor arrangement, the flower used in this meeting, actually I have a picture, here we go, is guess what, lotus flower again, which signifies peace and harmony. So for CCP, Musk's visit was important too. China state media gave the meeting front page coverage. He was treated like the head of state. According to Xinhua, Li Qiang referred to Tesla as a successful example of China-US economic and trade cooperation. He also emphasized that the Chinese market is always open to foreign enterprises and allowing enterprises from various countries to invest in China with peace of mind. Musk didn't go for nothing after his meeting with China's premier that evening. The China Association of Automobile Manufacturers announced a data security compliance inspection was conducted and make this picture a little smaller. And the 76 models, car models from six EV makers, and they are Tesla, BYD, Li Auto, Lotus, United Renewable Energy and NIO all passed the inspection. I don't know if it's, I use this translation software to translate these company names. I hope they're translated correctly. Now Tesla's models that passed the inspection include all models made from the Shanghai Gigafactory. So this was great news for Tesla, not only because it's the only foreign automaker that got on the list with the other major Chinese EV makers, but also Beijing may lift, this announcement may mean that, or means that Beijing may lift the restrictions and bans on Tesla vehicles. Previously, citing security concerns, the Chinese government ordered not only military compounds, but an increasing number of government affiliates, like highway operators, and even cultural and exhibit centers, conference centers to restrict Tesla vehicles access. So this announcement is definitely good news because it could mean that these bans on Tesla vehicles could be lifted. Another great news to Tesla is that during his visit, Chinese officials informed Tesla that they had preliminarily approved the deployment of FSD or full self-driving in China, which is Tesla's autonomous driving technology. And this is reported by Wall Street Journal and other Western media, even though Tesla and the Chinese government haven't formally confirmed it. Multiple media sources have also said that Tesla is collaborating with Chinese search media engine, I mean, sorry, Chinese search engine, Baidu, to deploy road mapping and navigation in China. So under this agreement, Baidu will allow Tesla to use its lane-level navigation system in China in order to deploy smart driving systems on public roads. Companies must first obtain a mapping license from the authorities. And as a foreign company, Tesla would need to partner with one of the several Chinese companies that possess such licenses. So it means that with a mapping license, Tesla will legally use its fully autonomous driving system on Chinese roads, and its fleet can collect environmental driving data by buildings. Following this news, Tesla's stock price surged, rising from Friday's closing price of $169 to Monday's closing price of $193. It's a gain of 14% in one day. And this is certainly a much needed boost to Musk and Tesla's stock, which has lost almost half of its value from the high of $261 on December 27th, 2023, that's only four months ago, to the low of $142 on April 22nd. Tesla has been struggling with a series of bad news, including China's BYD overtaking Tesla to become the largest EV maker in Q4 2023. Tesla's declining profit and revenue in Q1. Total cars delivered went below Wall Street expectation. And also media saying that the company has ditched the plan to make the low-end model too, even though Musk has denied it. And the company cutting workforce globally by 10%. So it seems that Elon Musk has had a productive trip, but we know there's no free lunch. When the Chinese government courted him in 2018, they were also extremely accommodating. Shanghai government sold 860,000 square meters of land to Tesla for building the Gigafactory at 10% of the market price. It provided a 18.5 billion yuan or $2.7 billion loan at an interest rate of 3.9, which was the lowest rate at the time in China. It ensured the completion of the factory by 2019. And most importantly, Tesla was the first automaker allowed to have a wholly owned subsidiary in China. But the Chinese authorities extremely favorable policies were intended to stimulate the entire EV ecosystem in China. After a few years, when Tesla had raised a class of Chinese competitors and build a mature supply chain, Beijing started to suppress Tesla, banning Tesla cars in government facilities, like I mentioned earlier, creating negative publicity, so on and so forth. So with the Chinese leadership's change of heart, we want to know what scheme is Beijing plotting behind this sudden enthusiasm again? Well, the Chinese is courting Elon Musk for four reasons, and that is based on my observation and analysis. First is for money. Well, China is losing foreign investments by a lot. Foreign companies are leaving China in droves. For example, do you know which one, which company has been the most expedient, has been leaving China in the most expedient manner? It's Apple. iPhone's production in India doubled in 2023, reaching 14% of global production. And this percentage is expected to increase to 25% in 2024, this year. And India's production of iPhones will grow five times in the next five years. Now, previously, 95% of iPhones were made in China. iPhones are made in China by Foxconn, right, a Taiwanese company, and the company has a major manufacturing base in Zhengzhou, Henan. I mean, the iPhone factories was mostly in Zhengzhou, because Foxconn also has factories in Guangzhou, but I think they don't make as many iPhones in the other facilities. They make like MacBook and maybe iPads, other products in the other facilities. But the Henan factory makes mostly iPhones. Now, listen to this. According to data published by the Zhengzhou Customs, Zhengzhou is the capital city of Henan. Henan's export in Q1, in first quarter, is down by 60.1.7% compared to first quarter last year. We know last, the first quarter of 2023 was not a full quarter because in January, 2023, most everyone in China was suffering from coughing or high fever. You know, the country was shut down for a month due to the number of, due to the rebound from ending, the rebound of infection from ending the zero COVID abruptly in December. So last year's Q1 wasn't a full three months. It was two months. So the fact that this quarter is down by 60, almost 62% than first quarter last year, that means it's down 80% probably. Now, Foxconn is the largest exporter in Henan. I think I saw numbers. It contributes to like 60, between 60 to 70% of the province total export. So the drastic decline in export shows the impact on Chinese economy when large multinational manufacturers pull out of China. So the CCP is trying to stop that. And they want to show that China is still following opening up policy. And they need a poster child to promote a benign investment environment. And Tesla and Elon Musk are the perfect ones. Well, Musk is the wealthiest man in the world. He owns high tech companies in AI, in space technologies, EV and so on. You can pretty much confirm this goal by the CCP by looking at how Elon Musk was invited. According to Chinese state TV, CCTV, Musk was invited by the China Council for the promotion of international trade. Listen to that, right? So he was invited by the China Council for the promotion of international trade. And after arriving in Beijing, he first met with the council's president, Ren Hongbin before meeting the premier. So that was the first goal, it's for money. The second, for money or for creating the publicity needed to bring in money. And the second is to obtain Tesla's core AI technologies. I say core technologies, it doesn't have to be AI. To help elevate Chinese, no, actually I should say AI technology. So to obtain Tesla's core AI technologies, to help elevate Chinese EV industry to a new height. Two days before Musk's trip to China, Tesla's vice president in charge of foreign relations in China, his name is Tao Tao, commented on the official social media account of the People's Daily. And he said that autonomous driving technology would become the new growth engine for the EV industry. Electric vehicles are one of the new three staples of exports heavily promoted by the Chinese government starting in 2024. China's old three staples of exports were clothing, household electronics and furnitures. The new staples for export are EVs, solar panels and lithium batteries. So the rapid rise of China's domestic EV manufacturers have benefited from Tesla's comprehensive open patent policy. Elon Musk doesn't care about patents. He famously said, patents are for the weak. His biggest competitor BYD has utilized over 100 of Tesla's proprietary technologies. Beijing believes that its EV companies will again benefit from Tesla's autonomous driving AI technology, which by the way, has a military application. Beijing realizes that the international, and secondly, Beijing realizes that the international EV market is becoming too competitive as countries are protecting their own domestic automakers and are in the process of imposing high tariffs on Chinese cars. Beijing is trying to plan ahead and therefore is courting Musk with the hope that Tesla will help comprehensively enhance China's capacities. In cutting edge technologies, such as like smart connectivities. Beijing believes that this will allow China to make a giant step forward in the intensely competitive international EV market, to stay ahead of the curves and compete from a higher starting point in areas by focusing on, by becoming more proficient in areas such as AI and energy storage. So this is Beijing's plan because it has realized that the EV market in the international space is becoming too messy right now or too challenging. So it needs to plan ahead and Elon Musk's open patent policy becomes user-friendly to the CCP. And the third goal is to use Tesla as a political countermeasure against the trade war initiated by the US and EU under the current geopolitical tension. Now, CCP wants to create, it wants to create a situation in which foreign governments or foreign industries heavily depend on China and the Chinese market. And this will give the CCP more bargaining chip for negotiation in geopolitical conflicts. And this has been a major strategy that CCP has been relying on in the past decades. And I think Li Qiang, the premier, has said it in his speech. So let me share with you his, oh, here's a picture of Tesla stock. You see this spike on April 29th, the day, that Monday after his trip. I just saw this graph I want to share with you. So here is what the Chinese press has said. I mean, this is a quote from Li Qiang. So he said, he stated that the economies of China and the US are deeply integrated, closely intertwined, and both nations can benefit from each other's development. Now, one Chinese economist, what's his name? I think he's one of the diehard leftist economist. He claims to be like one of Xi Jinping's top advisors, but he once said, a win-win situation for China means China wins twice. So when China creates a win-win situation, or I should say CCP, a win-win situation for the CCP is that CCP wins twice. So if you look at what he said in Chinese, those words, ni zhong you wo, wo zhong you ni, I translate it as closely intertwined, but literally it means you exist in me and I exist in you. I don't know if that's a good way to translate, yeah. So you exist in me and I exist in you, and that means closely intertwined. And when he said both nations can benefit from each other's development, that really means the CCP will benefit from this kind of a setup. So that's the goal. That's the goal that the CCP wants to have. By having more foreign multinational companies to go to China to invest in China, such as Tesla, then the two economies will be deeply integrated, closely intertwined, and this will prohibit foreign governments to decouple. And this is the ideal state Beijing wants to have in the event when it launches war, because then the West will think twice about economic sanctions, because the two countries are so closely intertwined. When you sanction China, your economy will feel the impact. So the more companies like Tesla, Apple, that go to China, the more difficult it will be for Western governments to counter China during time of war. And so that's the goal number three. And the fourth one is related to American politics. I know some of you advised me not to talk about US domestic politics. It's not because I want to talk about US politics, but sometimes topics just come up because it is related to Elon Musk and his visit to China. So regardless of your political opinion, I'm just saying this because this is the observation that I have. I think the CCP is nice to Elon Musk because it wants to make a political investment for the next four years in the event that Trump returns to the White House. They know Elon Musk isn't Joe Biden's best friend, but maybe closer to Donald Trump. The CCP wants to make a political investment early in the event because that's what they always do. I mean, yeah, that's what they do. So they want to do that early on in the event that White House changes hands. Now I have said that does not mean that they like Trump over Biden, okay? They just want to make that political investment in the event that Biden leaves the White House. Okay, so that's goal number four. So the meeting is more of a publicity event that both sides are trying to use to their biggest advantage. In terms of the substance, I think they're still far apart. Musk currently has two demands. He hopes for the approval of the FSD to be full approval in China. He also wishes for the Chinese authorities to let him export data previously stored in China. Well, actually to be collected by the FSD because all his data right now is stored in China. By the way, I don't think the data storage in China is safe. This is just a side note. It has nothing to do with today's topic. It's just something that came to my mind. You know, Guizhou, the province in Guizhou is China's major data center. China has built many major facilities to major data center facilities in Guizhou. You know what happened in January? There were so many fires in Guizhou, right? There was, I remember I did a live stream showing the map where the fires were like breaking out like in one third of the areas in Guizhou. And someone suspected if that has anything to do with the many data centers in Guizhou. So after that, I just had the thought that if you store all your data in China and if in Guizhou and then China have all these accidental fires that erupt like nonstop now, it's not safe. So that's just a side note, sorry. So yeah, so he wants to be able to export the data to the U.S. for AI learning and training. Now for the latter, I don't see any possibility of Chinese approval. Autonomous driving technology involves national road information, traffic data, passenger information, which are all considered a national security in China. I don't think the Chinese authorities will let him take the data to the U.S. and they're considered Chinese data to the U.S. On the other hand, I think it will be difficult for Musk to convince U.S. authorities to approve him bringing advanced AI technology to China because FSD does have a military application. So for those two reasons, I think the two sides are still far apart despite a great publicity event. Now, if the Chinese do agree to let Tesla take data out of China, then Elon Musk must have given the CCP, must have promised the CCP something extremely precious in exchange for the data export. So if that does happen, then the CCP must have gotten something extremely valuable and precious. But if Elon Musk is still smart, he shouldn't do this because his company may make some money in the short run, but the world in which he lives will be more dangerous because the CCP will have possessed some cutting edge AI technology that came from him. So that's all I will say tonight. Let me see, let me see if people have questions. Hello, well, snack for tonight is orange slices. Oh, that sounds good. Well, thank you. All right, let's see. All right, how about start a campfire, get a BYD? Yeah, recently, you know, one major national news in China that was suppressed was the fire that killed a woman's husband, brother, and son in a Huawei EV car. Oh, I don't remember the model, but it was a brand new model, a new Huawei EV model. And the car started burning on its own after I think it had a collision. And people outside were trying to get the three men in the car out, but the doors were locked. The lock wouldn't release. So people felt helpless. I mean, they couldn't rescue the man inside, you know, inside the car. So that was very sad. But that news was, the woman, I think the woman, the woman who lost her husband, son, and brother made a post and that piece was censored. But Chinese people had a relay. I mean, it was, it kept being deleted or removed, but people kept posting it. They had, the netizens had a relay. They kept posting it and reposting it until it became trending again. So that just shows you the power that the people can have online in China. So that's what everyone was talking about, I think this weekend in China, the fire. You probably have already heard about this. All right, Lotus. Yeah, I don't know if the names of the six EV companies that got approved were right because I used the translation software. Sometimes they make, you know, ridiculous mistake. So I have, I found the names to be very suspicious. You know, like sometimes they would change. They don't try to translate. They try to rewrite for you. And this is very annoying. So I, don't quote me on the six names of the Chinese EV companies that got approved for data security. But we know BYD, NIO, Li Auto and Tesla. Those four are on the list. The other two, I'm not so sure. All right, okay. All right. AI at work. Lotus isn't right. Okay, somebody said Lotus isn't right. I suspect and I'm like, it doesn't sound right. Okay, I think that's all. I don't have. All right, let me see. Alexander McKay, Lei, I think you really nailed it. Okay, all right. I'm glad you think so. All right. Tofu battery laughing out, yeah. There's just so many. I don't know if you watch the social media videos. There's just so many EV battery fires in China. Like every day you see some fire. It erupts somewhere. And I mean, the one that happened this past weekend was deadly because a woman lost three, it's just unthinkable. And Huawei isn't helping her. So this is, I think this is actually getting the Chinese people very concerned. And his brother, the brother who died in the car was actually a diehard Huawei fan. He, hours before his death, he was even, I think, posting online saying how much he liked Huawei products. He was defending, he was defending Huawei. This is just so sad. And he lost his life in a Huawei car because the doors malfunctioned, the locks malfunctioned, they wouldn't open. It's very sad. All right, no questions for me. Either I did really well or I didn't do well at all, which is okay, I can always improve. All right, IDK0, like do you think Musk is going to do this for money only? Will the government even trust him anymore? I think Musk needed some, I mean, he needed some good publicity to help his stock. His stock is really doing so miserably. And I think in this case, the Chinese really want him. I mean, for the four reasons I gave, the Chinese, seriously, the Chinese economy is in a worse situation than Tesla's stock. So the Chinese needed him more than Musk needs China. So he's like, why not? If you want me, I'm sure I'll go. Let me hear what you can offer me. So yeah, I think it's for money. John S, thank you Lei, your shows are much appreciated. Well, thank you. Someone said, am I wrong that I love the style, look of the big van EV, even if Chinese think it looks like a coffin? I have no idea what model you are referring to. Is there a EV van that looks like a coffin? All right. I think BYD makes or sells batteries to other Chinese EV companies. Yes, that's right. It also sells batteries to Tesla in China. All right, here, oh, Talamio Salamanca. Like the new art in the background, I've been working a lot. So I have been busy, but I'm hoping to tune in as I usually did. Well, thank you. It's my wallpaper. People say I sit too closely to the wall because they look the paper, the pattern is distracting. And I try to blur the background, it doesn't look good. So while if it's distracting, I think I'm okay if you stare at my wallpaper because it's ancient Chinese landscape. And I'm perfectly okay if you look at my wallpaper and not me. I'm okay. All right, all right, all right. I think that's all. No more questions. I think I'm at the bottom. All right, that's all for tonight. Thank you very much for joining me. And I'll see you next time unless I see one more question. No more question. Okay, all right. Enjoy the rest of your night or day. I'll see you next time. Bye-bye.