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On Monday, an angry protestor in a white t-shirt stole the limelight at opening day of the Shanghai International Automobile Industry Exhibition by scampering atop a Tesla Model 3 and shouting “Tesla brakes fail!” to a crowd of onlookers.
She was dragged away by security guards. But video of the incident, uploaded by visitors attending the event, spread quickly on Chinese social media—calling unwanted attention to allegations of quality defects at the American electric vehicle maker in a market vital to the company’s future growth. The Wall Street Journal reports that within hours, more than 150 million people had viewed a hashtag of the incident on China’s Twitter-like Weibo platform.
Tesla later said, via Weibo, that the protester was a disgruntled customer, surnamed Zhang from Henan province, and that her father had been injured in a February accident in which his Model 3 crashed into another vehicle. The Journal reports that Ms. Zhang, in her own Weibo post, claims her father and mother were hospitalized after the collision.
Chinese authorities don’t generally countenance acts of civil disobedience. Ms. Zhang, whose claims could not be immediately verified, remains for now in Shanghai police custody. But her antics gained wide coverage in China’s state-owned press. On Tuesday, China’s Xinhua News Agency slammed Tesla in a commentary for being “arrogant” in responding to customer concerns about vehicle quality and safety. The China Global Times reported on Tuesday that vendors on Chinese e-commerce platforms are selling white t-shirts emblazoned with the word’s “Tesla brakes fail!” next to the Tesla logo.
As Eamon has reported, until early this year, Tesla was on a roll in China. The company was the first foreign automaker to win 100% control of its China operations. The completion of Tesla’s Shanghai Gigafactory in September 2019 allowed it to avoid import taxes and shipping delays on cars sold in China—which is the world’s largest market for electric vehicles by far with 1.2 million sold in 2020, more than 40% the global total.
Tesla carved out 21% of that pie, making it the market leader. CNBC reports that Tesla’s China sales in 2020 reached $6.6 billion, double the previous year and 21% of the company’s global revenue. The Model 3, the best-selling electric car in China in 2020, sold more than 137,000 vehicles.
But over the past three months, the Palo Alto, California-based company has seemed to lose its China mojo. A clear trouble sign came in February when officials from China’s State Administration for Market Regulation and four other regulators summoned Tesla executives to a meeting and admonished them to “abide by Chinese laws” and “strengthen internal management systems” to protect Chinese consumers. The dressing-down followed a series of complaints from Chinese customers including reports of car explosions and faulty auto-braking technology.
At a meeting of the China Development Forum in Beijing last month, Tesla CEO Elon Musk was obliged to fend off allegations that cameras from Tesla vehicles could be used for espionage by the U.S. government after it was reported that the cars had been banned from entering Chinese military facilities.
In Shanghai this week, Tesla’s rivals in China—among them leading electric vehicle makers such as Geely Automotive Holdings, Nio Inc., and Xpeng Inc.—are scrambling to capitalize on the American company’s travails. Electric vehicles dominate the event with homegrown challengers stressing technology and Internet connectivity to woo younger Chinese drivers who seem increasingly drawn to local brands. (Bloomberg offers a handy visual guide to some of the competing models on display.)
Shanghai-based Nio, whose share price is up four-fold since its rocky 2018 debut on the New York Stock Exchange, announced plans Monday to expand its network of battery-swapping and charging stations into underserved regions of northern China. The company has inked a deal with Sinopec, the state-owned oil group, to roll out 5,000 swapping and charging stations over the next several years.
Xpeng, a Nasdaq-listed startup based in Guangzhou, has unveiled a lidar-powered autonomous driving features and will introduce a new family sedan later this year. Geely, the owner of Volvo, is targeting tech-savvy younger customers with a premium electric car brand called Zeekr.
Meanwhile, Chinese manufacturers from other industries are piling into the electronic vehicle sector.
Shenzhen-based telecommunications giant Huawei Technologies has teamed with a subsidiary of state-run Baic Motor to create a new luxury EV brand called Arcfox. The Arcfox Alpha-S, unveiled in Shanghai on Saturday, will run on Huawei’s Harmony operating system and come equipped with a lidar chip and 5G connectivity. Lei Jun, founder of Xiaomi Corp., announced last month that the giant smartphone maker is joining the EV fray with an initial investment of $1.5 billion that will grow to $10 billion over the next ten years.
To keep its lead in China, Tesla must do more than reassure consumers and regulators about the quality of its cars; it will have to out-innovate its up-and-coming rivals.
More Eastworld news below.
Clay Chandler
– clay.chandler@fortune.com
This edition of Eastworld was curated and produced by Eamon Barrett. Reach him at eamon.barrett@fortune.com
EASTWORLD NEWS
Boao boss
China President Xi Jinping delivered a keynote speech to the Boao Forum on Tuesday, criticizing countries that “impose their rules on others.” China bills the Boao Forum, held in South China’s Hainan, as an Asian alternative to Davos, but few global leaders attend. In his speech, Xi also highlighted the need for sustainable development and warned against decoupling and, also, hegemony. “Bossing others around or meddling in others’ internal affairs will not get one any support,” Xi said. Fortune
Invite controversy
Myanmar junta leader Min Aung Hlaing will attend the ASEAN summit in Indonesia this week, marking the military head’s first overseas trip since seizing power in a coup on Feb. 1. Rights groups report security forces have killed over 700 pro-democracy protesters since February. A shadow government, formed last week by members of Myanmar’s deposed political parties, is demanding an invitation to the summit too. Al Jazeera
Oil over fish
Philippines President Rodrigo Duterte said Monday he would send warships to confront Chinese vessels in the South China Sea if the China began drilling for oil in the disputed territory. The comments were actually a climbdown from tensions stoked when a flotilla of Chinese fishing ships was spotted anchored off the disputed Whitsun Reef in March. Duterte said Monday he wouldn’t assert the Philippines claim to sovereignty over the waters for the sake of reclaiming fishing grounds. Reuters
Summer in Canada
Lawyers for Huawei Technologies CFO Meng Wanzhou are seeking a three-month delay in the executive’s ongoing extradition hearing in Vancouver, after Huawei obtained documents from HSBC last week that lawyers say are pivotal to the case. Meng’s extradition hearing has dragged on for two years, following her arrest in December 2018. Final arguments for the hearing are due to begin April 26. Bloomberg
MARKETS AND MOVERS
Foxconn — Foxconn said it has entered negotiations with the state of Wisconsin regarding the fate of a stalled $10 billion factory the Taiwanese manufacturer pledged to build in 2017. Wisconsin granted Foxconn $4 billion in tax breaks for the factory.
Kangmei Pharmaceutical — A court in Guangzhou agreed to hear China’s first-ever class action lawsuit against a publicly-listed company. The case was filed by a government-backed body representing a group of retail investors who allege Kangmei Pharmaceutical engaged in fraud.
Meituan — Consumer services app Meituan raised close to $10 billion through a stock and bond sale this week, in the largest top-up placement from a Hong Kong-listed firm to date. Meituan plans to use the funds for R&D in autonomous driving, drones and other new tech.
Trip — Shares in China’s largest online travel agency Trip.com rose 4.5% on Monday as the Nasdaq-listed firm launched a secondary listing in Hong Kong. Trip raised $1.09 billion in the Hong Kong debut.
Lithium — Australia miners Galaxy and Orocobre are set for a $3.1 billion merger, creating the world’s fifth-largest producer of lithium chemicals—vital for EVs. Orocobre CEO Martin Perez will head the combined entity.
FINAL FIGURE
45 times
The proposed SPAC listing from Singapore's ride hailing giant Grab will grant company founder Anthony Tan special B-class shares that carry 45 times the voting rights of regular shares made available to investors. Tan will hold just 2.2% of the company's shares but will wield 60.4% of the company's voting power, leaving other shareholders little chance of changing Tan's management decisions, should they ever want to. The dual-class voting structure is not new to SPACs and is common among tech companies led by celebrity CEOs, like Facebook, Alibaba and Xiaomi. But the power-holding structure has become more common among the recent spate of SPACs. Fortune
