Tesla founder and CEO Elon Musk has long believed China will be a huge driver of electric vehicle sales, even outranking the United States one day. Wall Street analysts have expressed the same belief.
But as the trade war between the United States and China intensifies, Musk finds himself on both sides of the divide. The Chinese government is doing much more to support EVs than the U.S. government right now, but the 25 percent tariff that Tesla and other foreign automakers pay to sell in the Chinese market is steep.
Musk has praised the Chinese government in the past for the regulatory moves it has made to force automakers to embrace EVs. But he also recently expressed support for President Donald Trump's trade war, citing the high tariffs that China imposes on foreign automakers. That was before China's announcement of steep additional tariffs on foreign cars that would double the current import duty, which sent Tesla shares lower by as much as 4 percent early on Wednesday.
Tesla shares were volatile in trading on Wednesday, bouncing back from the early loss to a significant gain, suggesting that the market, like Musk, is divided on how the China situation will play out for electric cars and whether short-term trade jitters should really factor into the analysis of longer-term corporate goals. The only thing Musk clearly knows, as well as all foreign automakers, is that they need to be able to play in China to grow.
On March 8 Musk tweeted about the 25 percent import duty U.S. cars pay to be sold in China versus a 2.5 percent duty on Chinese cars coming to the U.S. market: "I am against import duties in general, but the current rules make things very difficult. It's like competing in an Olympic race wearing lead shoes."
Over the summer, Musk said at the National Governors Association annual meeting, "Sometimes people are under the impression that China is either dragging their feet or somehow behind the U.S. in terms of sustainable energy promotion, but they are by far the most aggressive on Earth. It's crazy."