Elon Musk’s charm offensive in China wins Tesla tax break

Elon Musk‘s charm offensive in China appears to have paid off. The billionaire chief executive officer (CEO) of Tesla Inc. won a tax exemption for the electric-car maker, got to promote his ground-digging Boring Co. passion project and even drew praise on social media for his frugal food and accommodation choices—he was spotted eating dumplings and staying at the Holiday Inn.

Musk began making headlines in China on Thursday, when he publicly sparred with Alibaba Group Holding Ltd chairman Jack Ma at the World Artificial Intelligence Conference in Shanghai.

An onstage debate between China’s richest man and the Tesla boss left a largely Chinese audience both awestruck and dumbfounded as the pair sparred over everything from the existence of aliens to the preservation of human consciousness.

Musk, alternating between tech visionary and larger-than-life Bond villain, argued that AI will soon surpass the human race; that civilization may end and hence humankind needed to explore the cosmos (specifically Mars); and that people are essentially dumb creatures circumscribed by genes.

It was a wide-ranging—and at times bizarre—conversation, that went viral on social media.

During his visit, Musk also toured a factory Tesla is building in the country and reportedly met China’s transport minister Li Xiaopeng on Friday.

At the event, Musk said he has never seen anything getting built as fast as the Tesla facility, saying he is “astounded” by the progress at the site. “I really think China’s the future. It’s very impressive,” he said.

However, Tesla on Friday raised car prices in China, responding to trade tensions that weigh on the country’s currency and have led to oscillating import tariffs on vehicles. The price of a basic level imported Model 3 sedan went up more than 2% to 363,900 yuan ($50,900), Tesla’s website showed Friday. Prices for basic level Model S sedans and Model X sport utility vehicles increased by a similar percentage, to 793,900 yuan and 809,900 yuan, respectively.

A Tesla spokesperson in China declined to elaborate on the price change, referring to information available on the company’s website. A decline in the yuan reduces the value of any earnings that Tesla brings back from China and converts to dollars. Earlier this week, the Chinese currency fell to an 11-year low against the dollar.

Later that day, China announced that all Tesla cars will be exempted from a 10% purchase tax, something that is typically reserved for domestic makers of electric vehicles.

Tesla currently imports all of the cars it sells in China but plans to start making the Model 3, its top-selling vehicle, at the new plant later this year. Its shares jumped as much as 4.8% after news of the tax break.

The exemption also sends a signal that the Chinese automotive market, the world’s biggest, is open to competition, said Yale Zhang, managing director of AutoForesight, a Shanghai-based auto consultancy.

“It clearly shows the state’s attitude in introducing a strong competitor” in new-energy vehicles, Zhang said. “For those domestic EV makers, now if you don’t run fast enough, you’ll be beaten up.”

China’s concession to one of America’s most high-profile companies stood out as it came amid heightened uncertainty as to where the trade war between the two countries is headed.

US President Donald Trump last month ordered American companies to immediately begin looking for alternatives to China, only to later suggest that the trade tensions were cooling.

On Sunday, the US slapped tariffs on roughly $110 billion in Chinese imports, prompting China to retaliate by rolling out higher levies on about $75 billion of US goods in stages.

China plans to resume a suspended extra 25% duty on US cars on 15 December, with another 10% on top for some vehicles. With existing general duties on automobiles taken into account, the total tariff charged on US-made cars would be as high as 50%.

That gives extra reason for Elon Musk, who during his China trip praised the nation’s lead in global electric-car production, to begin manufacturing in the country soon while staying in the good graces of the Chinese government.

And although he didn’t get to announce the launch of Boring Co. in China during this trip—as he indicated he would in August in a tweet—Musk got to pitch his ideas to some local heavyweights. He met Xiao Yaqing, head of China’s State Administration for Market Regulation, and got to share his vision of the project before he left.

But not before trying some of the local delicacies. The billionaire, who has his share of fans in China, was spotted waiting in line with his team to order and dine at a local restaurant, where an order of six dumplings costs 6 yuan (84 US cents).