Elon Musk’s ties to China could complicate his Twitter offer

Elon Musk’s ties to China through his role as a major shareholder in electric car brand Tesla could add complexity to his bid to buy Twitter.

Other companies that want access to China are bowing to pressure to follow Beijing’s positions on Taiwan and other issues. But Twitter is shut out by internet barriers that prevent most Chinese users from seeing global social media, giving Beijing no influence over the company, although the ruling Communist Party uses it to spread propaganda. abroad.

Tesla Inc’s ambitions in China could give Beijing that leverage to pressure Twitter to silence human rights activists and other critics or relax its rules on propaganda if the $44 billion purchase of Musk is coming to fruition, some experts suggest. Chinese customers bought half of the Teslas sold last year. Its busiest factory and main export center is in Shanghai.

The Chinese exert enormous leverage on companies, said Anne Stevenson-Yang of J Capital Research. If you care about the Shanghai operation (of Tesla), then you’re going to put everything else into operation.

Musk says he sees no indication that Beijing might use Tesla as leverage, but other companies aren’t waiting for government orders.

Automakers, clothing brands and others are taking preemptive action to protect their access to China by changing marketing or products sold globally to reflect official positions such as the ruling party’s assertion that Autonomous Taiwan is part of its territory.

Musk said on Friday that his bid had been put on hold as he tried to confirm whether the number of Twitter accounts without real users behind them was less than 5% of the total, as the company says.

He told a business conference in Miami on Monday that a deal at a lower price was not out of the question, Bloomberg News reported. That backed suggestions from industry analysts that Musk wants to walk away from the deal or a lower price because of a drop in the value of the Tesla sock, the purchase of which he has pledged to finance.

Trying to use an investor’s stake in one company to pressure another company outside of China would be a new tactic. But foreign investors know that the ruling party is increasingly assertive in defending its core interests around the world and attacking global brands even when it imposes costs on China and its audiences.

Officials warned companies that they should respect the feelings of Chinese people and avoid eating Chinese rice by breaking Chinese bowls.

A handful have forgone opportunities in China to avoid cooperating with censorship or official surveillance or facing consumer backlash overseas on human rights or other issues. More common are companies such as hotel operator Marriott, which in 2018 fired an employee who liked a Twitter post praising a survey of customers outside China that called Tibet a country.

Regulators can pressure automakers by preventing them from ramping up production while ordering them to keep quiet about why. More openly, state media have called for boycotts of Japanese, South Korean and other brands in disputes with their governments.

Tesla’s sales in China rose 226% last year to 473,600 vehicles, according to LMC Automotive. This was about half of its 935,222 worldwide deliveries.

Musk, who is the chairman of Tesla, was asked about the possibility of the automaker being used by Beijing as leverage on Twitter while appearing virtually at a May 11 event by The Financial Times newspaper on the future of the automotive industry.

I haven’t seen any indication to that effect, Musk replied.

Musk said he expects China to represent 25-30% of Tesla’s market in the long term.

The South African-born billionaire said he doesn’t see another Tesla factory in China in the near term, but the company will expand to Shanghai.

The Austin, Texas-headquartered company did not respond to email questions about its expansion plans.

Rights activists slammed Tesla after it opened a showroom in the northwest’s Xinjiang last year, despite complaints of abuse against Muslim ethnic groups living there . The company is not alone: ​​Volkswagen AG operates a factory in the region and Chinese partners of other global brands have outlets there.

Musk says he wants to make Twitter a politically neutral forum for as much free speech as each country’s laws allow.

He did not say what he might do about Twitter’s requirement that accounts of state media and Chinese officials be labeled as state-affiliated. Dropping that or restricting inflammatory speech could make it easier for Beijing or other governments to sway American public opinion in elections.

A reporter from the official China Daily newspaper wants the tag removed.

Elon Musk should remove my tag, Chen Weihua wrote on Twitter on April 30. This is totally discriminatory and a suppression of freedom of expression.

Some companies are unable to balance Chinese pressure and public outrage abroad over accusations of forced labor in Xinjiang and other abuses.

Last year, state media called for a boycott of Swedish clothing retailer H&M and other brands that stopped using Xinjiang cotton. Most stuck to their stance despite a hit to sales, fearing perhaps bigger losses due to a backlash from consumers overseas.

Some companies don’t want to be seen as hauling water for the government, said Lester Ross, director of the Beijing office of law firm WilmerHale in Washington.

China has the largest population of internet users at just over a billion, according to official data. But most cannot see Twitter, other overseas social media outlets and thousands of websites run by media outlets, human rights or pro-democracy activists and others.

China has its own popular but heavily censored social media. They are required to remove material deemed subversive or pornographic.

Sina Weibo, a Twitter-like microblogging service, claims to have 573 million monthly active users, more than double Twitter’s 229 million. Tencent’s WeChat messaging service says 1.2 billion people use it every day.

Censorship has steadily tightened since President Xi Jinping came to power in 2012.

Accounts run by support groups for young gays and lesbians have been shut down. Complaints about food shortages as Shanghai shut down to fight virus outbreaks have been suppressed.

In 2018, Tesla became the first foreign automaker to set up its own factory in China after ownership restrictions in the industry were removed. Until then, global automakers had to go through public partners who assembled their vehicles.

Tesla’s honeymoon included access to subsidies for power buyers and a sales tax exemption. But when the grants were extended in 2020 to help the industry weather the pandemic, Tesla was left out, while its closest Chinese rival, luxury electric brand NIO, remained eligible.

Musk is known for his flamboyant gestures, including smoking marijuana during a radio interview. But he is attentive to Chinese sensibilities.

He complained that virus measures in California had disrupted Tesla production, but said nothing in public after the Shanghai shutdown forced his company’s factory to close.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Sharon D. Cole