In the short term, Tesla needs China more then China needs Tesa. Tesla's shareholders would revolt if Tesla gave up the Chinese market.
In the long term, this will help bootstrap China's expertise in electric car manufacturing.
It's a brilliant economic policy. Foreign companies cannot resist access to such a large market - they can either partner, or watch their competitors do so.
Not sure if you know about export control and the Wassenaar Arrangement. I don't think Intel can manufacture in China at the advanced node even if they wanted to.
Intel gave China x86 IP for free (atom) + another Billion dollars "investment" to build a fab, all just in case they would be next in line for anti monopoly fine after Qualcomm got punished. Intel used to dump Atoms below manufacturing cost on Chinese market, their domestic SOC vendors didnt like that and it was either handouts painted as joint venture or heavy fines.
All companies that aren't producing any actual physical stuff. At least use a fair comparison rather than comparing a car company with a bunch of online services.
The whole joint venture requirement of China is just another way for China to steal IP and money from other countries. Talk about China taking advantage of the US and EU.
This gets really fun when thinking about media piracy.
The risk of ignoring a market isn't just the lost immediate revenue, it's that that market might develop in ways that are worse for you in the long run.
The canonical can't-argue-against example of pirating a movie or show is "I literally can't even pay to watch this in my country, right now." But once a substantial industry exists to satisfy the people with no legal option, the people in the countries with plenty of legal options have access to it too! And then it turns into "why pay when torrent?"
If Spotify had existed worldwide in 1998, would Napster have been big? If Netflix/Hulu/Amazon/iTunes purchases+rentals had all existed and been global in the year 2000, would movie/TV file sharing have taken off in the same way it did? Or would it be more like app store piracy - I'm sure it exists, but I don't know anybody who bothers, and those things were global and online from day 1.
The comparison to cars isn't direct, but it's not hard to find disruption of physical goods manufacturing sparked by lower-end-at-first competitors arising from a less-served market.
The copycats are coming either way, you might as well make some money in the mean time. Even if it were impossible for copycats to emerge without these partnerships (so ignore domestic innovation, reverse engineering, foreign education, foreign consultants, and espionage) odds are your competitor already partnered so you have nothing more to lose.
This is my normal point of view, but after thinking more about the industrial revolution in England vs the US, where the US started way behind, stole rapidly, then moved into "improve" quickly too, I wonder if it won't work out for Western companies.
The knowledge won't stay in a bottle. I doubt any treaty in the world could keep an automotive industry from developing in China. Maybe the only potential progressions are (a) let local clones develop while ignoring the market, watch hopelessly if those local clones then go on to innovate further than you or (b) do ventures like this to at least be directly exposed to any potential upside if the local folks surpass you?
There's also a side question here about the difference between physical goods and software. Something like WeChat faces a really steep uphill climb to conquer the west because the starting conditions are so different - I'd have to be convinced to change from our existing ways of doing the same thing, vs being one of the first to enable things in a new market. On the other hand, smartphone clones can sell everywhere with the same hardware (especially once Google gave Android away freely). Japanese/Korean auto manufacturing is more the example for that (and obviously for Tesla), and that happened on its own.
I kind of disagree, only because you don't need to be in China for them to steal your IP. China is known to engage in industrial espionage, both digital and physical, and steals from companies all over the world, and the US in particular. It's probably more effective to bring them in as a partner to mitigate that risk, than it is to try to avoid them.
If they really just want to steal wouldn't it be easier if they let Tesla have a factory? As it stands now China is on the way to sell 1 million EVs a year and Tesla is not going to have a factory by 2020 at the earliest. Doesn't sound like a great plan if the plan were to entice Tesla to have a factory so they can steal from it.
It's not stealing, it's forcing you to share your know-how (sometimes patented, but perhaps not in China) in exchange to access to market. That includes training of workers (sort of like graduates joining Google, leaving getting trained, after a couple of years they leave and establish a startup).
The other side of this is takeovers in the West - sometimes they get blocked by government, like quite recently in Germany.
The West wanted cheap workforce, it came with a hefty price that will be paid years later after WTO admission, didn't you know?
Like you mentioned, the problem is that China promised an open market 15 years ago to wto. What we got instead is forced local 50/50 “partnership” and tech transfers. With the Chinese state enterprises winning at the end.
Also, if you don't agree to this then it provides a competitive advantage to local companies. Its almost like an import tax on information / Intellectual Property instead of money. I don't see Tesla really winning this battle at all.
Samuel Slater (June 9, 1768 – April 21, 1835) was an
early English-American industrialist known as the
"Father of the American Industrial Revolution" (a phrase
coined by Andrew Jackson) and the "Father of the
American Factory System."
In the UK, he was called "Slater the Traitor" because he
brought British textile technology to America, modifying
it for United States use. He memorized the designs of
textile factory machinery as an apprentice to a pioneer
in the British industry before migrating to the United
States at the age of 21.
There's a slight difference between someone memorizing how things work, versus whole sale theft of corporate documents, data, complex technical design, etc.
This makes absolutely no sense. If I implement a machine whose design is someones else's protected IP, the law cares not a bit whether I recorded the design details or merely memorized them. And no one else will care either.
You'll note that this was exactly the case with Samuel Slater; the Brits considered him a thief regardless.
Wasn't some of this prompted by Britain's effective technology embargo on America? I think there was a time we couldn't even legally import good woodworking tools for fear these things would allow the Americans to outgrow Britain.
Didn't the US have an embargo against China? And even when Nixon lifted the embargo, it was only for non-strategic items (which encompassed more than just militarily strategic; factory technology etc. if I understand right).
If Tesla wanted, they probably can let the Join Venture do some assembly works and keep critical battery, Self Driving SW, etc IP to the main company.
Not much diff than AirBus has join venture in China for some Airplane assembly works. But it certainly didn't share all the Jet Engine technology, Filght Control Software etc with the Join Venture in China.
China knows that it has big market and would like leverage to get more benefit from western companies who like to access that market.
There are a large number of existing auto JVs, and I'd bet that it's not much like an aircraft company, where it's completely normal to order a jet engine from a different company than the plane manufacturer. And jet engine technology is subject to export controls.
I looked at the GM JV situation, and it appears that they do manufacture engines in China.
Although on one hand it makes me mad, I can't help but feel a bit envious that I don't live somewhere with a government so interested in protecting domestic manufacturing.
from my experience operating in China, its really pretty hostile to foriegn enterprises. If you want to import into China, you face incredibly high import duties. If you want to open a WOFE (wholly owned foreign entity), you have to recursively give them your ownership information so if you are venture backed, they will require your cap table, your investors cap table etc, etc. There is a reason there are very few American products in China outside of the biggest American brands, its simply too difficult and has too much compliance. I love China, but I do think the trade rules asymmetry with the US will need to be addressed at some point. There hasn't really been a detailed and honest discussion about this.
Well the US is no longer part of the tpp.... In the counterfactual world where tpp is signed by the American president I think it would have quite potent
Not sure it ever was or is, but been told that when entering China the fine print of the foreign-local partnership pretty much grants the CCP rights to your IP, do when they take your IP and copy it, it's technically legal.
If you think the asymmetry with the US is bad, you should look at how European businesses get treated! Carrefour gets shut down when the Dalai Lama visits France, most all Norwegian trade got shut down over a Nobel Prize China took issue with... at least the US has a large and unified negotiating position.
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[ 2.7 ms ] story [ 124 ms ] threadIn the long term, this will help bootstrap China's expertise in electric car manufacturing.
It's a brilliant economic policy. Foreign companies cannot resist access to such a large market - they can either partner, or watch their competitors do so.
Intel's only factory in china uses 300 or 65 nm processes. That's Pentium 4 level manufacturing, and clearly not using critical x86 IP.
They are currently building yet another US factory for 7 nm processes.
The risk of ignoring a market isn't just the lost immediate revenue, it's that that market might develop in ways that are worse for you in the long run.
The canonical can't-argue-against example of pirating a movie or show is "I literally can't even pay to watch this in my country, right now." But once a substantial industry exists to satisfy the people with no legal option, the people in the countries with plenty of legal options have access to it too! And then it turns into "why pay when torrent?"
If Spotify had existed worldwide in 1998, would Napster have been big? If Netflix/Hulu/Amazon/iTunes purchases+rentals had all existed and been global in the year 2000, would movie/TV file sharing have taken off in the same way it did? Or would it be more like app store piracy - I'm sure it exists, but I don't know anybody who bothers, and those things were global and online from day 1.
The comparison to cars isn't direct, but it's not hard to find disruption of physical goods manufacturing sparked by lower-end-at-first competitors arising from a less-served market.
The knowledge won't stay in a bottle. I doubt any treaty in the world could keep an automotive industry from developing in China. Maybe the only potential progressions are (a) let local clones develop while ignoring the market, watch hopelessly if those local clones then go on to innovate further than you or (b) do ventures like this to at least be directly exposed to any potential upside if the local folks surpass you?
There's also a side question here about the difference between physical goods and software. Something like WeChat faces a really steep uphill climb to conquer the west because the starting conditions are so different - I'd have to be convinced to change from our existing ways of doing the same thing, vs being one of the first to enable things in a new market. On the other hand, smartphone clones can sell everywhere with the same hardware (especially once Google gave Android away freely). Japanese/Korean auto manufacturing is more the example for that (and obviously for Tesla), and that happened on its own.
Thats not a meaningful way to conceptualize the event though.
The other side of this is takeovers in the West - sometimes they get blocked by government, like quite recently in Germany.
The West wanted cheap workforce, it came with a hefty price that will be paid years later after WTO admission, didn't you know?
https://en.wikipedia.org/wiki/Samuel_Slater
There, it's even now.
You'll note that this was exactly the case with Samuel Slater; the Brits considered him a thief regardless.
https://en.wikipedia.org/wiki/Infant_industry_argument
Not much diff than AirBus has join venture in China for some Airplane assembly works. But it certainly didn't share all the Jet Engine technology, Filght Control Software etc with the Join Venture in China.
China knows that it has big market and would like leverage to get more benefit from western companies who like to access that market.
It is just business.
I looked at the GM JV situation, and it appears that they do manufacture engines in China.
Everyone else can stick to the Chinese lemons.
An inflated purchase price thanks to 25% tariffs just makes them more attractive to buyers who don't care about price.
https://www.google.com/amp/foreignpolicy.com/2015/10/07/chin...
Hearsay, for all I know.