When Elon Musk first set up Tesla's factory in China, it looked like he had an advantage.
He gained access to top leaders and secured policy changes that benefited Tesla. He also acclimated workers to long hours and fewer protections after a run-in with U.S. regulators over working conditions at a California factory. The Shanghai factory helped make Tesla the world's most valuable car company and Mr. Musk an ultra-rich man.
But Tesla is currently struggling. Mr. Musk helped create competitors in the form of Chinese electric vehicle manufacturers that have stolen market share and become a security concern for the United States and Europe.
Tesla benefited from the China policy it helped shape.
In California, where Tesla launched its first car in 2008, the company has benefited from emissions regulations that allow it to sell credits (worth billions of dollars) to automakers that fail to meet pollution targets.
As Musk turned to China, his lobbyists encouraged Chinese leaders to adopt similar policies. Emails and other documents we obtained show they worked through environmental activists in California who aimed to clean up China's air.
The Chinese government adopted this policy in 2017, but it was also promoted by groups unrelated to Tesla. After Tesla opened its Shanghai factory in 2020, the company received hundreds of millions of dollars in credits through the policy, according to market analysis firm CRU Group. .
Musk's fortune is tied to Tesla's Shanghai factory.
The Shanghai factory will replace Tesla's Fremont, California factory as Tesla's largest and most productive factory, accounting for more than half of the company's global shipments and most of its profits.
Musk worked closely with city officials and current Chinese Prime Minister Li Qiang as the factory took shape in less than a year. Under Li's watch, state-run banks provided low-interest loans to Tesla, but the loans were so generous that one auto official recalled cabinet members balking at them.
China also changed ownership rules to allow Tesla to set up without a local partner, making it the first foreign car company to do so in China.
Mr. Musk has cut back on production and labor costs in Shanghai, so even if he wanted to, he wouldn't be able to escape easily. With the billionaire's wealth tied up in Tesla stock, his personal fortune now depends on what happens in China.
Tesla's growth in China has led to Musk being detained by Beijing.
Mr. Musk's reliance on the Shanghai factory could increase the Chinese government's influence.
This is a concern because Musk's second company, SpaceX, has a sensitive contract with the Pentagon and controls much of the world's satellite internet through its Starlink network.
Musk says his companies shouldn't be confused. But even as he railed against American politicians, he praised China's leaders and sided with China in geopolitical disputes.
In an online conversation with two members of Congress in July, he described himself as “some kind of pro-China”.
China offered an escape from labor issues.
Mr. Musk, who has suggested that American workers are lazy, demanded intensity at Tesla's Fremont factory, sometimes even sleeping on the factory floor himself.
In Shanghai, Mr. Musk could escape from U.S. regulators and labor groups.
We spoke to a Chinese factory worker who said he was asked to work six consecutive 12-hour shifts during the 2022 coronavirus lockdown.
Some slept on the factory floor, as Mr. Musk did in Fremont. They can also choose not to work in exchange for a pay cut, they said.
Last year, a government report pointing to safety gaps when a worker was crushed to death by machinery was removed.
Tesla has accelerated EV development in China.
Chinese leaders wanted a Tesla factory to boost China's EV sector. That's exactly what happened.
In Shanghai, Tesla switched to using locally produced batteries and components, in some cases helping suppliers develop the technology and then selling it to Chinese EV makers. Tesla also cultivated the next generation of talent.
Now Europe and America are trying to catch up. French Finance Minister Bruno Le Maire said China has a five to seven year lead over Europe.
And Tesla itself is becoming increasingly vulnerable. Late last year, Chinese rival BYD overtook the company in global sales. Musk warned in January that without trade barriers, BYD and others would “put most of the world's car companies out of business.”