- Tesla is victorious in almost every court case thanks to a justice system that acts as the long arm of the Chinese Communist Party. “The odds are stacked against you,” the founder of Shanghai-based advisory firm Automobility told the AP.
Tesla has adopted an unusual strategy to defend its brand from critics in China.
According to an investigation by The Associated Press, the carmaker has sued more than a dozen journalists and even its own customers, weaponizing a legal system that operates as an extended arm of the Communist Party regime.
In every case where a ruling has ensued, Tesla won its lawsuit. One of the few open cases remains—related to Zhang Yazhou, more on that below—and that is only because she is appealing the verdict handed down against her.
Moreover, of the 81 civil judgements in which Tesla owners sued the company over safety and quality issues or contract disputes, only nine were victorious.
“The odds are stacked against you,” Bill Russo, founder of Shanghai-based advisory firm Automobility, told the AP. “It like going to the casino and winning every hand.”
Zhang is famous for clambering on top of a Tesla in 2021 during the Auto Shanghai, one of the world’s biggest motor shows, to warn potential car buyers that its cars’ brakes can fail. She was in the passenger car seat earlier that year when an accident occurred that she blamed on Tesla, which sent her parents to the hospital with injuries.
Capturing headlines across the industry, the stunt briefly sparked conspiracy theories among Tesla investors that either the Communist Party or a local competitor like Nio had put her up to it in an effort to besmirch the brand.
Tesla subsquently sued her for defamation and won, with a Chinese court ordering her to pay more than $23,000 in damages and apologize publicly for her accusation.
China is the pillar propping up Tesla’s EV sales
Musk can count on a powerful ally. China’s second-highest ranking official behind president Xi Jinping is none other than the man that helped Elon Musk build his massive Chinese vehicle factory: state premier and former Shanghai party boss Li Qiang.
While Tesla doesn’t break down its actual production numbers, the manufacturing plant has a capacity of more than 950,000 units, according to the company. Fully utilized, that would likely make it the largest single site in the global industry.
More than ever, Tesla is dependent on China for sales now that key markets including California and Europe show its car business is under severe pressure.
It’s not unusual for automakers to see cyclical peaks and troughs that coincide with their product cadence. In order to at least preserve its claim to being a growth stock, Tesla has sacrificed profits for volume, with its fourth-quarter automotive gross margin dropping to its lowest level in five years.
UBS estimates sales of fully electric vehicles in China will grow 5% to 7.62 million vehicles this year. That means out of the 14.2 million EVs sold worldwide, more than every second will go to a Chinese customer.
Although third-party data shows Tesla’s vehicle sales in China increased last year, its business there suffered a decline in revenue both in absolute value expressed in dollars as well as its importance relative to consolidated turnover.
Tesla China saw its top line shrink 3.7% to $20.9 billion in 2024, according to the company’s 10-K filing, with the country dropping a percentage point to make up 21.4% of group-wide sales.
While its accounts do not explain why, it is almost certainly a reflection of the ongoing price war that has forced manufacturers like Tesla to offer a steady stream of rebates to prop up volumes.
Zhang, for her part, didn’t say whether she would remain with Tesla, but chances are the disgruntled owner will switch to one of the many domestic competitors like BYD. She’s also appealing the defamation ruling against her.
“I refuse to accept it,” Zhang told the AP. “As a consumer even if I said something wrong, I have the right to comment and criticize.”
