In just a few weeks, China’s President Xi Jinping will be in Washington for a much hyped state visit to the U.S. While there will be much on the agenda between the two top world powers, one small automaker will be looking to get a foot in the door.
In a bid to boost prospects in China where sales are lagging, the Wall Street Journal reports Tesla Motors (TSLA) is urging the White House to press China on loosening auto-industry restrictions during President Xi’s visit.
As Yahoo Finance columnist Rick Newman notes in the attached video, Tesla and other automakers face numerous hurdles in China. “In order to manufacture and sell heavy products like automobiles in China, the basic rule is you have to have a joint venture with a Chinese partner so that you can get in on this huge market,” he says. “It also gives some of the benefit to the Chinese partner - they get to learn about your technology, they learn Western techniques and so forth.”
Get the Latest Market Data and News with the Yahoo Finance App
And this is the sticking point for a company like Tesla Motors - which is almost more technology company than automaker. “This is anathema to Tesla which has basically built lots and lots of proprietary stuff into its vehicles,” Newman says. “They're really struggling with sales and I'm not sure they're going to get any kind of relief at all, because there are lots of companies who would love to be able to just sell products in China as if it's a free market - which it's not.”
China was a big bet for CEO Elon Musk and Tesla. The company had predicted it would sell at least a third of its vehicles in the country; however in 2014 it only sold around 2500 units there, far below that threshold. For Wall Street, that could be a problem.
“Well [Tesla] can survive without China, but you know that stock price is sky high and I'm sure part of the reason is expectations about being able to crack the Chinese market,” Newman surmises. “I think they definitely need the ability to make inroads in China, at least in terms of convincing investors that their valuation is worth it.“
Tesla is also concerned about getting outflanked back home in the U.S. The journal notes numerous electric car startups based in the U.S., but potentially backed by Chinese money, are popping up. These startups get to draw from Silicon Valley talent technology, without having to deal with the kind other restrictions Tesla would face in China.
More from Yahoo Finance
Fed talk hits stocks; China stocks seeing red; Netflix loses 'Hunger Games'
Why ‘Flash Boys’ are here to stay
Crouching Tiger, Hidden Dragon: Time Warner’s sneaky China play
