Elon Musk kicks off China visit, Tesla expansion in focus

BEIJING (Reuters) -Tesla Chief Executive Elon Musk on Tuesday kicked off a high-stakes visit to China with a meeting with the country's foreign minister in Beijing, marking his return to the electric carmaker's largest production hub after three years.

The trip is the latest return by a top U.S. CEO to China since the country reopened its borders and reversed its zero-COVID policy in December. Apple's Tim Cook visited in March, while JP Morgan's Jamie Dimon and Starbucks' Laxman Narasimhan are also in China this week.

Musk met Chinese foreign minister Qin Gang hours after landing in Beijing.

Qin told Musk China was committed to improving the business environment for investors, including Tesla, and used an elaborate driving metaphor to describe China-U.S. relations, according to a statement from his ministry.

"We must step on the brake in time, avoid dangerous driving and be skillful at using the accelerator to promote mutually beneficial cooperation," Qin said.

The foreign ministry quoted Musk as saying he was willing to expand business in China and opposed a decoupling of the U.S. and China economies, adding he described the world's two largest economies "conjoined twins."

Tesla did not respond to a request for comment on Musk's trip, his itinerary or his meeting with Qin. China is Tesla's second-largest market after the United States.

Musk, who also owns Twitter, was quiet on the platform after arriving in China, where Twitter is banned but accessible to some users through a virtual private network. He had not posted on his official Weibo account either.

He is expected to meet other senior Chinese officials and visit Tesla's Shanghai plant during his trip, Reuters reported on Monday, though it was not clear who exactly he would meet or what issues they would discuss.

A source with knowledge of the matter said on Tuesday that a meeting with Zeng Yuqun, chairman of CATL, the Chinese battery giant and a key Tesla supplier, was also planned in Beijing. CATL did not respond to a request for comment.

Reuters reported in March that Musk had been planning a trip to China and seeking a meeting with Chinese Premier Li Qiang.

In a 2019 trip to China, Musk met with then-Premier Li Keqiang. A year later, he created a buzz on Chinese social media for dancing onstage to celebrate the opening of Tesla's Shanghai factory.

INCREASING COMPETITION FOR TESLA

Tesla faces intensifying competition from Chinese-made electric vehicles and some uncertainty about expansion plans for the Shanghai plant, its largest production hub.

Tesla investors have questioned whether and by how much the electric carmaker will increase output in Shanghai.

Investment firm Wedbush analyst Daniel Ives said he expected Tesla to "aggressively focus on building out its China footprint".

Despite increasing competition, China's market for electric vehicles, the world's largest, has become "the golden goose EV market", he said, a reference to a source of continued profit.

He called Tesla's Shanghai plant "the heart and lungs" of the company's global production in a note for investors.

Another issue for investors is whether China regulators will clear the release of Tesla's advanced driver assistance features available in the United States as part of the "Full Self Driving" software it sells for $15,000 per vehicle.

Musk's space company, SpaceX, and the military applications of its Starlink satellite network have also been watched with interest and concern by Chinese researchers since Russia's invasion of Ukraine.

State-owned Chinese companies are rushing to follow Starlink by launching their own low-Earth orbit, communications satellites. Chinese military researchers have studied Starlink as a potentially threatening technology, according to research reviewed by Reuters.

(Reporting by Tingshu Wang and Josh Arslan in Beijing and Zhang Yan in Shanghai; Writing by Brenda Goh; Editing by Kevin Krolicki, Edwina Gibbs and Emelia Sithole-Matarise)