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The Risks and Promises of Tesla’s Bold China Bet

During Tesla’s quarterly conference call earlier this week, Chief Executive Elon Musk once again emphasized the company’s grand ambitions for the Chinese market.

It’s a note he’s been hitting a lot, including during the previous investor call, at the Geekpark Conference in Beijing last month and in the top section of the company’s letter to shareholders on Tuesday.

“We plan to expand in China as fast as possible because we believe the country could be one of our largest markets within a few years,” Musk and Chief Financial Officer Deepak Ahuja wrote.

The Palo Alto electric vehicle manufacturer just delivered its first cars in the nation of 1.35 billion people, after more than a year of lining up necessary government approvals. It’s building out its network of battery-charging stations and service centers there “as fast as possible,” Musk said on the call. And the company plans to start manufacturing automobiles in the country within the next four years, which would allow the company to get around stiff import tariffs and minimize logistics costs.

“Shipping two tons of metal over long distances is not very efficient,” Musk said. “It’s just the sensible thing to do to try to satisfy local demand with local production.”
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