As the world grapples with ongoing trade wars sparked by Donald Trump’s policies, Elon Musk’s empire—especially his electric vehicle company, Tesla—could find itself in a precarious position. Despite being the wealthiest man on the planet, Musk’s role within Tesla, coupled with the global economic landscape, places him in a vulnerable spot. The electric vehicle industry giant has seen its share of challenges, particularly as tariffs and political tension escalate. In a development that could drastically alter Tesla’s future, China holds a powerful lever that could cripple Musk’s business at any given moment.
Tesla’s Year to Forget
The start of 2025 hasn’t been kind to Tesla. The company, which once rode a wave of success after the election of Donald Trump, now faces significant setbacks. The electric vehicle manufacturer’s troubles seem to be intertwined with Musk’s own political and business moves. Following Trump’s victory, Tesla flourished, but the aftermath of Musk’s decisions, especially his involvement in American politics and leadership in government, has put the company on shaky ground.
Recent reports indicate that Tesla’s current struggles are tied to Musk’s controversial role in U.S. governance. The backlash has been swift and intense. Public opinion has soured, with boycotts and shareholder protests demanding Musk’s removal. The unrest has even spilled over into physical altercations, with incidents of violence at Tesla dealerships. The company also had a difficult earnings call, during which Musk admitted that Tesla had experienced a 70% drop in profits—a grim figure that further highlights the struggles of what was once considered an unstoppable force in the auto industry.
The Role of the Shanghai Gigafactory
Despite Tesla’s challenges in the U.S., there’s another factor playing a pivotal role in the company’s survival: the Shanghai Gigafactory. Located in China, this factory produces roughly half of Tesla’s 1.8 million annual vehicles. Given Tesla’s heavy reliance on the factory for production, the company’s future could be in serious jeopardy if the Chinese government ever decided to pull the plug on operations there.
China holds significant influence over Musk, and its potential to disrupt Tesla’s operations cannot be understated. The Shanghai Gigafactory’s importance cannot be overstated, and its closure would deal a devastating blow to Tesla’s output and profitability. If the Chinese Communist Party were to shut it down, as some analysts warn could happen, the consequences for Tesla would be immediate and catastrophic. Prescott Watson, a venture capitalist, offered a blunt assessment of the situation: “I mean, it’s f**ked,” he said, referring to the potential collapse of Tesla’s operations if China chose to pull the plug on the Shanghai Gigafactory.
A Global Crisis for Tesla
In such a scenario, Tesla’s sales could plummet by as much as 50% overnight. With China serving as the primary manufacturing hub for the company, a loss of production from the Gigafactory could drastically reduce Tesla’s ability to supply vehicles not only in China but globally. Tesla’s capacity to produce cars in the U.S. and Europe could also drop by up to half, leading to a dramatic reduction in available stock.
The ripple effects of such an action could extend well beyond the company’s bottom line. As one of the leading innovators in the electric vehicle market, Tesla’s loss of production capacity would harm its standing in the global EV race. Musk’s company would lose a significant competitive edge, and his influence in the market would rapidly diminish.
China’s History of Using Economic Power
Although the Chinese government has yet to make any direct threats regarding the shutdown of Tesla’s Gigafactory, its track record of using economic power to punish tech magnates who fall out of favor should raise concerns. China’s government has previously taken action against tech companies that it perceives as problematic, including the likes of Alibaba and other high-profile Chinese companies. While Tesla’s presence in the country has been mutually beneficial, Musk’s political ties and potential influence in Washington, D.C., could make him a target.
Prescott Watson highlighted how Tesla’s growth in China has been partly facilitated by the Chinese government’s willingness to support foreign companies willing to invest in the country’s electric vehicle infrastructure. “Unlike any country in the West, China can build a factory in a year and have it producing millions of vehicles within two years,” Watson said. This efficiency has allowed Tesla to rapidly expand its footprint in China, contributing to the company’s impressive global growth. However, this rapid development also makes Tesla vulnerable to the whims of the Chinese government, which could choose to pull the rug out from under Musk at any moment.
Musk’s Struggles Ahead
Looking ahead, Elon Musk finds himself in a delicate position. The initial partnership between Tesla and China seemed like a perfect match, with both parties benefiting from mutual goals in the electric vehicle market. However, as Bill Russo, an auto industry consultant based in Shanghai, points out, the dynamics are shifting. “Tesla is a fast horse, but if you allow Chinese companies to race alongside them, the Chinese companies will race faster,” Russo noted.
Tesla’s past success in China was largely thanks to the country’s willingness to accommodate Musk’s ambitions. The government provided Musk with the resources he needed to establish the Shanghai Gigafactory, and in return, Musk helped position China as a leader in the global electric vehicle industry. However, that arrangement could be coming to an end. As China’s domestic electric vehicle manufacturers continue to innovate and expand, Musk may find himself outpaced by local companies that are benefiting from government-backed support.
The Big Red Button
In summary, while Elon Musk may still be the richest man in the world, his position is far from secure. The Shanghai Gigafactory, which is integral to Tesla’s global operations, is a key point of vulnerability. Should China decide to press the “big red button” and shut down the Gigafactory, the fallout for Tesla could be catastrophic. The company’s global sales would plummet, and its production capacity could be slashed in half.
With China’s history of using economic power to punish individuals and companies that it perceives as threats, Musk’s relationship with the country’s government could become increasingly strained. If China chooses to take action against Musk, Tesla’s future could be jeopardized, and the world could witness the rapid decline of one of the most influential companies in the world.
