Every time Tesla CEO Elon Musk and his former ally President Donald Trump clash, the EV company gets his in the stock market, mainly because investors fear that the White House will use the company as a means to retribution against the technological maverick and his attempt to torpedo the "Big Beautiful Bill" – Trump's landmark domestic tax legislation (which Musk says is fiscally irresponsible because it creates massive debt).
But for all the bickering and its impact on the the US, in the race for global electric vehicle dominance, Elon Musk has already made his choice – and it's not not DC, not the US, and certainly not Donald Trump.
For all the potential the US offers Musk in the EV world, the American market is simply too small, too gas-driven, and still needs to grow before it becomes a major focus.
Rather, his real heart lies in Xi Jinping's China, where battery factories hum 24/7, government ministers roll out red carpets for foreign capital, and electric cars now outsell gas guzzlers by the month. While US politicians bicker over subsidies and subpoenas, Musk has quietly hitched Tesla's future to the only country building the EV revolution at industrial scale – and it's a bet that makes Washington's grip on him look like a rounding error.
In 2021, China accounted for half of all global electric vehicle (EV) sales. Just three years later, that figure has surged to nearly two-thirds, a dominance no other country comes close to.
Since July 2024, electric car sales in China have overtaken those of gasoline-powered vehicles on a monthly basis, and by year's end, EVs made up close to 50% of total new car sales nationwide.
This wasn't just a market shift – it was a signal to every global automaker about where the future is being built. And no one heard it louder than Elon Musk.
Despite being the most visible CEO in America, Musk has quietly tied Tesla's long-term prospects not to Washington, but to Beijing. Gigafactory Shanghai – Tesla's largest and most productive plant globally – produced over 710,000 vehicles in 2022, accounting for more than half of the company's global deliveries. In 2023, Tesla's China revenue reached $21.75 billion, or 22.5% of its global earnings. By comparison, the US market, while still important, is facing saturation, regulatory drag, and mounting political risk. And that risk just got sharper.
In recent weeks, the relationship between Donald Trump and Elon Musk has deteriorated into a public feud. On June 5, Musk criticized Trump's "One Big Beautiful Bill Act," labeling it a "disgusting abomination" due to its increased military and border spending while cutting social programs. Musk also accused Trump of ingratitude, stating that Trump would have lost the election without his support. In response, Trump expressed disappointment in Musk, suggesting he was upset over the removal of electric vehicle tax credits from the bill and insinuating that Musk "missed the Oval Office." The exchange escalated when Musk alluded to Trump's alleged connections to Jeffrey Epstein, a post he later deleted. Subsequently, Trump threatened to cut federal subsidies to Musk's companies and announced plans to sell his red Tesla Model S, which he had previously purchased as a symbol of their alliance.
Yet if Trump thought this would scare Musk into retreat, he misunderstands both the Tesla CEO's strategy – and his balance sheet. The reality is, Tesla cannot afford to reduce its exposure to China. The country is not only the largest source of EV demand, it is also the center of battery innovation, supply chain integration, and regulatory acceleration.
Take manufacturing: Tesla's Gigafactory Shanghai was built with roughly 65% less capital expenditure per unit of capacity than the Model 3 production lines in the US. Thanks to local supply chains – sourcing over 95% of parts domestically – and high levels of automation, it has become Tesla's most efficient production hub. Analysts and company executives have repeatedly pointed out that Shanghai's operating costs are lower than those of Tesla's US plants, making it the global benchmark for scalable, cost-effective EV manufacturing.
Shanghai has also become a global export hub: Chinese-made Teslas are shipped to Europe, Australia, and Southeast Asia, enabling Tesla to hedge against regional downturns.
China is where the real competition is
Musk isn't just chasing volume in China – he's trying to stay alive against BYD, China's homegrown juggernaut. BYD commanded more than 34% of China's new energy vehicle market in 2024, while Tesla's share stood at just 6%. Yet that still translated to 657,102 Teslas sold domestically – a number most US automakers would envy. For Musk, the writing is on the wall: If you want to stay relevant in EVs, you have to fight – and win – on Chinese soil.
Then there's R&D. Tesla is now developing its much-anticipated $25,000 compact EV – the so-called "Model 2" – at its Shanghai research center, with plans to manufacture it locally. This is no accident. China's engineering talent, consumer feedback cycles, and parts ecosystem move at a speed the US can't match. And this model isn't just for Chinese buyers – it's Tesla's ticket to penetrate emerging markets from Southeast Asia to South America. In other words, Musk is betting that the next global Tesla won't be made in California. It'll be made in China.
After security concerns in 2021 about Tesla's in-car cameras, Musk quickly moved to localize data storage and open a dedicated data center in Shanghai. He has consistently praised China's efficiency, infrastructure, and policy environment, and was rewarded with regulatory fast-tracking, including permission to build Tesla's new Megapack energy storage factory in Shanghai – Tesla's first energy infrastructure investment outside the US.
That's not appeasement. It's alignment. And in China, alignment pays.
The irony is that while some American politicians frame Musk's China footprint as a vulnerability, it's actually Tesla's most valuable moat. The company has secured deep supply chain resilience, policy support, and access to the world's most dynamic auto market – all while US rivals struggle to scale EV production at home. General Motors and Ford are still losing money on every EV sold. Tesla, by contrast, has a proven, cost-efficient platform – and a profitable one – when paired with China's scale.
Could Trump's rhetoric translate into actual policy? Possibly. A future White House could slap tariffs on Chinese-made Teslas, limit federal EV subsidies to American-built models, or block software integrations with Chinese partners. But these are speed bumps – not existential threats.
Why? Because Musk isn't building Tesla just for the US market anymore. He's building it for a world where China is the default growth engine, not just a branch office. Whether it's raw demand, cost optimization, or tech iteration, China delivers what the US increasingly cannot: a roadmap to mass EV adoption at profit.
