Key points to remember:

• Chinese government officials helped Tesla secure loans worth around $ 1.6 billion.

• Tesla’s sales in China reached $ 6.66 billion in 2020, or 21% of its total of $ 31.54 billion.

• Tesla can expect immediate fallout and penalties if it doesn’t overcome its performance and safety issues.

The media have widely reported that Tesla is benefiting from a privileged position in China. In fact, the brand caused a sensation with local consumers at the end of 2019, when it started production at its Shanghai Gigafactory. But aside from his fans’ love for the brand, what really caught the world’s attention was the government’s favorable treatment of Tesla over its competitors.

CNBC reports that in 2019, “Chinese government officials helped Tesla secure loans worth around $ 1.6 billion” for the construction of its Shanghai plant. Additionally, during the 2020 global pandemic, the Shanghai government helped Tesla “quickly resume normal operations” despite widespread lockdowns.

Along with cheap loans, tax breaks and easing restrictions, Tesla also enjoyed unprecedented freedoms that were not given to other foreign competitors. For example, Tesla was allowed to retain full control of its China operations without entering into a joint venture with a local partner.

In response to China’s benevolence, Elon Musk praised the country and its leadership in various interviews. Musk even infuriated some American political analysts when he celebrated the “intelligent “and” hard workersFrom China while criticizing the “authorized” and “obliging” character of Americans, especially those who live in places like Los Angeles and New York.

Shortly after the news that Chinese regulators feared Tesla cars were being used to spy on China, Musk used a more seductive style of communication, speaking of China in even more flattering terms. “I would like to take an optimistic note, and I am convinced that the future of China will be great and that China is on its way to become the largest economy in the world with a lot of prosperity in the future.” Musk said.

The business mogul also tried to convince China that his company would not benefit foreign governments from espionage. “We are strongly encouraged to be very confidential with all information”, Musk told the China Development Forum. “If Tesla used cars to spy in China or elsewhere, we would be shut down.”

But despite Musk’s concentrated attempts to step up a charm offensive, major fallout could be imminent. In a new era of superpower rivalry and unresolved tensions, US companies with large operations in China have seen their profits cut. In addition, these companies have become defenseless in the face of local threats like consumer boycott and regulatory sanctions.

Until then, Tesla seemed secure, and China often viewed Musk as the role model of the Western entrepreneur. But in a temperamental and fast-paced market like China’s, you can go from being a business celebrity to an outcast in a matter of days. Jack Ma is the perfect example.

And if there is any indication that China is falling in love with Tesla, it’s in the drastic change in tone of local newspapers. CNN highlights how, in November, Xinhua lambasted Musk’s company after an incident in which a Tesla lawyer wrote to American regulators about a recall in China, attributing the problem to “driver abuse”. In January, another controversy erupted when a Tesla employee told a customer after a charging accident that damaged his car that the power grid was at fault.

CNN reports that these incidents scandalized Xinhua, who criticized Tesla for his “arrogant attitude”. The Global Times also criticized Tesla for “its ignorance in understanding Chinese consumers”. These incidents damaged Tesla’s credibility and attracted further scrutiny from Chinese regulators.

Clearly, if Tesla is to remain the market leader in electric vehicles in China, it must avoid future reputation crises. At this point, Musk needs China more than China needs Tesla.

Tesla’s sales in China reached $ 6.7 billion in 2020, which was 21% of its total of $ 31.5 billion, according to a recent filing from the company. Additionally, Tesla was the best-selling electric car in China last year, with 135,400 Model 3s sold, according to the China Passenger Car Association. And his Model Y had a powerful market release, becoming the third best-selling electric car in February.

However, the winds of change are about to sweep the Chinese electric car industry as competition intensifies and domestic companies become more innovative.

In January, Chinese electric car maker Nio introduced its first sedan, the et7, featuring autonomous driving technology, CNBC reports. Likewise, state-owned SAIC Motor has seen success with its budget-friendly Hong Guang Mini EV priced at $ 4,500, which “currently exceeds Tesla’s top-end cars,” according to the report. BBC News.

In the second half of 2020, the Hong Guang Mini EV sold 112,000 cars, ranking second behind Tesla’s Model 3.

China’s position vis-à-vis Tesla is ambiguous, so it is difficult to assess Beijing’s future strategy. But Tesla can expect immediate fallout and penalties if it doesn’t overcome its performance and safety issues.

The American electric vehicle maker can no longer afford to lose a key advantage if it is to stay ahead of its domestic competitors. And at this point, a misstep could turn China against Musk.

Without a doubt, Beijing’s construction ambitions ”a leading electric vehicle sector in the world“Will inevitably have an impact on his approach to foreign companies. While a future divorce is inevitable, the question is whether Tesla and China will end their affair amicably or fiercely.