Why Elon Musk Needs China

When Elon Musk first set up Tesla’s factory in China, he appeared to have the upper hand.

He gained access to top leaders and secured policy changes that benefited Tesla. He also got workers accustomed to long hours and fewer protections, after clashing with U.S. regulators over labor conditions at his California plant. The Shanghai factory helped make Tesla the most valuable car company in the world and Mr. Musk ultrarich.

But Tesla is now struggling. Mr. Musk helped create his competition, Chinese E.V. makers that are taking market share and becoming a security concern for the United States and Europe.

Tesla benefited from a Chinese policy it helped shape.

In California, where Tesla launched its first car in 2008, the company has profited from an emissions mandate that allows it to sell credits — billions of dollars worth of them — to automakers that cannot meet pollution targets.

As Mr. Musk turned to China, his lobbyists encouraged leaders there to adopt a similar policy. Emails and other documents we obtained show they worked through California environmentalists intent on cleaning up China’s air.

Beijing adopted the policy, which was also being promoted by groups unconnected to Tesla, in 2017. After Tesla opened its Shanghai factory in 2020, the company earned hundreds of millions of dollars in credits through the policy, according to the market analysis company CRU Group.