Tesla and Chinese rivals signal EV price war truce in ‘socialist values’ pledge

Receive free Chinese business & finance updates

We’ll send you a myFT Daily Digest email rounding up the latest Chinese business & finance news every morning.

Elon Musk’s Tesla has joined Chinese automakers in pledging to enhance “core socialist values” and compete fairly in the country’s car market after Beijing directed the industry to rein in a months-long price war.

Tesla and its biggest Chinese rival BYD were among 16 manufacturers to make the commitment in a letter signed at a motor industry conference in Shanghai on Thursday. It follows a battle among EV makers after Tesla slashed prices on its Model 3 and Model Y cars last October in the face of rising domestic competition.

Tesla and Warren Buffett-backed BYD have been the chief beneficiaries, boosting sales at the expense of a clutch of smaller rivals and some foreign brands. Both companies reported record sales in the second quarter.

The joint letter, which came at the behest of the Ministry of Industry and Information Technology, appeared to signal a truce among the top EV makers in the world’s biggest car market.

Miao Changxing, a senior inspector at the ministry, said China’s car industry needed to avoid “reckless” price-cutting.

The letter — which uses language popular with Chinese leader Xi Jinping and the ruling Communist party — also highlights how Tesla is navigating an increasingly fraught US-China business landscape and rising competitiveness in the world’s biggest electric-vehicle market. Tesla was the only foreign carmaker to sign.

Tesla declined to comment immediately on the pledge. The Chinese market is immensely valuable to the company, accounting for just under one-third of annual sales.

Musk, who also owns Twitter and SpaceX, travelled to China last month and met the foreign, commerce and industry ministers as well as Robin Zeng, the founder and chair of CATL, the world’s biggest maker of electric-vehicle batteries.

His trip returned the spotlight to restrictions on free speech that have intensified under Xi. Twitter is banned in China, and Musk refrained from using the platform during his visit, drawing criticism from human rights groups over allegations of compliance with Chinese censorship.

Yaqiu Wang, senior China researcher with Human Rights Watch, said the pledge on Thursday undermined Tesla’s standing. “Failing to comply with ‘core socialist values’ has been frequently used by authorities to punish speeches that are critical of the Chinese government,” she said.

In a separate video address to the World Artificial Intelligence Conference in Shanghai on Thursday, Musk forecast the car industry could achieve nearly full self-driving capability later this year.

Experts said Musk’s visit to China last month might help pave the way for the US electric-vehicle maker to gain Chinese regulatory approvals for new self-driving features in its locally made cars. This is seen as an important hurdle to clear for Tesla to compete in the increasingly cut-throat Chinese EV market.

Musk also said he believed China would develop strong capabilities in artificial intelligence, while also appealing for regulatory oversight of the industry.

“As long as the Chinese people decide to do well in one thing, they will, including AI,” Musk said.