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Elon Musk Starts Tesla China Gigafactory
January 17 2019 - Everybody Wants to Be the Next Elon Musk (at Least in China) By Bloomberg
Tesla’s China-backed rivals have their own California dreams.
EV startups poaching Tesla talent and setting up shop nearby.
Tesla Inc. is now hiring in China, and China Inc. is hiring in Tesla’s backyard.
A ground-breaking in Shanghai attended by Tesla Chief Executive Officer Elon Musk last week marked what will become the first factory in the nation entirely owned by a foreign automaker. In Tesla’s Silicon Valley neighborhood, meanwhile, there are now about a dozen electric automakers with Chinese owners or backers setting up shop or recruiting Musk’s former co-workers. These well-funded startups, some of which haven’t sold a single car, are buying up factories, testing prototypes on public roads and kitting out lavish offices in the San Francisco Bay Area. Landing a former Tesla executive has become a top prize.
“Everybody wants to be the next Elon Musk -- the Chinese Elon Musk,” said Martin Eberhard, a co-founder of Tesla back when it was called Tesla Motors. He served on the board of Chinese EV maker SF Motors Inc. after it bought his post-Tesla startup.
The king of touting ex-Tesla hires is Faraday Future, a startup founded by former Chinese billionaire Jia Yueting that began work last year in a refurbished tire factory in Hanford, California -- about 200 miles from Tesla’s Fremont plant. A search of LinkedIn shows more than 70 Faraday employees listing Tesla as past work experience -- though not all of them remain after recent departures -- and Faraday often boasts of “top talent” hires like Jeff Risher, the former head of Tesla’s intellectual property and litigation.
Byton, a Tencent Holdings Ltd.-backed startup that recently raised $500 million, hired former Tesla executive Tom Wessner as senior vice president of global supply chain and, for extra Silicon Valley sheen, snapped up former Apple Inc. designer Jeff Chung. Byton, the brand of Future Mobility Corp., has an office in Santa Clara, California, and a new artificial-intelligence lab in Los Angeles, where it employs engineers for research and development.
The budding automaker regularly brings Chinese VIPs to tour its Silicon Valley offices.
“The talent is based here,” said Andrew Hussey, a spokesman for Byton. The company plans to launch its first production model this year in China and targets U.S. sales starting next year with an electric SUV.
Venture-capital investment into Chinese EV makers nearly doubled last year to $6.4 billion, according to Pitchbook, even as China cracked down on aggressive mergers-and-acquisitions in sectors such as real estate and casinos. Many Tesla wannabes have taken to seeking alliances with Musk’s local rivals.
Eberhard is the ultimate example of a prestige hire by a China-based EV startup, even if his former employer, SF Motors, doesn’t sound much like a Chinese startup. Its office in Santa Clara has all the trappings of Silicon Valley: a pingpong table, catered lunches, a gym.
Eberhard, forced out of Tesla by Musk in 2007, didn’t realize he was being enlisted by a Chinese billionaire when he sold another startup, InEVit Inc., to SF Motors in 2017 for an undisclosed price. The parent company of SF Motors is Chongqing Sokon Industry Group Co., a China-based maker of cars and their parts. SF Motors is run by the millennial son of Sokon Chairman Zhang Xinghai.
“If you can sell a car in China with enough Western shine on it, you can get 30 percent more for the exact same car,” said Eberhard, who drove one of his Tesla Roadsters to lunch at Buck’s, a kitschy Silicon Valley diner known as a hangout for tech tycoons. “What does it take to get that Western shine? Open a Silicon Valley company, hire Westerners.”
Poaching Tesla talent is getting easier since Musk’s company swelled -- he tweeted in October that “the Tesla team” included 45,000 people -- and tends to shed senior executives and other workers with regularity. Lucid Motors Inc., partly backed by Beijing-based Tsing Capital, hired Tesla’s former vice president of vehicle engineering, Peter Rawlinson, as chief technology officer; moved into bigger facilities just across the bay from Tesla’s factory; and raised $1 billion from Saudi Arabia’s Public Investment Fund.
Tesla’s press offices for China and North America didn’t respond to requests for comment.
XPeng Motors Technology Ltd., a Guangzhou-based EV maker that received more than $900 million last year -- including from Alibaba Group Holding Ltd., Foxconn Technology Group and IDG Capital, set up a Mountain View office in Google’s neighborhood. Chairman He Xiaopeng has four Teslas, and the ex-Tesla employees working there include Gu Junli, a machine-learning expert.
Shanghai-based NIO Inc. doubled the size of its San Jose office after selling shares in a U.S. initial public offering last year. The company, which said it has delivered more than 11,000 cars to customers, has a market valuation of about $7 billion. LinkedIn shows more than 100 employees with Tesla experience. The company declined to comment on any Tesla connections.
Most Chinese EV players are technology companies and have an edge not from experience making cars but from understanding Chinese consumer behavior, said Nannan Kou, head of China research for BloombergNEF.
“Their competitive advantage is in China,” he said. “The U.S. market to them is icing on the cake.”
Yet that home-field advantage may take a hit in coming years. Tesla’s Shanghai factory could start Model 3 production by year’s end, Musk said. Volkswagen AG also is building a plant to make EVs with a local partner, and the Chinese government is starting to reduce the subsidies that long have supported consumer purchases of EVs.
“Silicon Valley offices and ex-Tesla hires are not as effective as they have been,” Kou said. “Popular models, cool features, effective production capacity and solid sales revenue are the keys now.”
Whether China’s Musk wannabes can find a way to sell in the U.S. is another open question. There will be regulatory, labor and supply-chain challenges, not to mention ongoing trade war tensions. The Office of the U.S. Trade Representative cited the Chinese Communist Party connections of real-estate billionaire Hui Ka Yan in a November report on concerns about China’s intellectual-property practices after one of his subsidiaries agreed to invest $2 billion in Faraday.
Hui’s Evergrande didn’t respond to requests for comment.
Plus, China’s EV makers have to fend off any reciprocal poaching of talent in China by foreign automakers seeking to sell there. At Tesla’s Shanghai ground-breaking, Musk said a Chinese engineer hired today eventually could become CEO.
For now, though, the Chinese EV startups can stick with their strategy of importing a little Tesla shine, said Eberhard, whose Roadster sports a MRTESLA license plate. “China is a big enough place and has enough cash that they can place a lot of bets.”
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