Will China Soon Control Both Elon Musk and SpaceX?

At the end of April, Elon Musk at the last moment cancelled a trip to India, instead showed up in Beijing, and snagged a deal to rescue Tesla. The results were immediate: The shares of the electric-vehicle maker, which had been out-of-favor on Wall Street, soared on the news.

Now Washington has to be worried that China will control Musk's other company, SpaceX, which is critical to America's ambitions in space.

The billionaire during his two-day trip to China, the second in less than a year, announced he had struck a deal with China's Baidu on mapping and navigation software. The China Association of Automobile Manufacturers said in an April 28 statement that Tesla's Model 3 and Model Y vehicles had passed China's data-security requirements.

In China, where car buyers are far more focused on tech features than Americans, Musk has wanted to roll out Tesla's "Full Self-Driving" software. Currently, his cars have only the basic "Autopilot" driver-assistance feature. Most observers assume he is on the glide path to Beijing's approval.

Musk has made Tesla reliant on China, and China's rulers know that.

Musk certainly needs the upgrade. Not long ago, Tesla in China was viewed as a standout. Now, that is no longer the case. BYD Company and "an entire fleet of EV upstarts" are, in the words of Asia Times contributor Scott Foster, "increasingly making it look like an ordinary car company."

As a result, Tesla's market share is in a tailspin. A year ago, Tesla held the No. 1 ranking in China's new-energy vehicle retail segment. In the first quarter of this year, the company had fallen to third place. BYD in that period sold 586,000 cars, Geely 137,000, and Tesla 132,000. It is not clear that Tesla can compete in China, where the regime does just about everything it can to favor Chinese competitors.

Musk knows that China is "the golden goose EV market." Tesla's "gigafactory" in Shanghai, which opened in 2019, is the "heart and lungs" of Musk's car production. The facility is Tesla's largest outside America. China is now Tesla's second-largest market.

China building leverage

Musk has made Tesla reliant on China, and China's rulers know that. Unfortunately for him, Beijing has many beefs with his other iconic venture, SpaceX. For one thing, SpaceX stands in the way of China putting a human on the moon before America's return visit and Musk's Starship lifter can help the U.S. build moon bases faster. Moreover, SpaceX is a major U.S. defense contractor and, even more important, operates the Starlink satellite constellation in low-earth orbit.

Starlink as of last month had 5,800 operational satellites circling the earth. That is a stunning 60% of all active satellites. Musk contemplates expanding his constellation to 30,000 satellites and may now be thinking of 42,000 of them. China knows that, short of detonating multiple nuclear weapons in space, it will be hard-pressed to take all those satellites down, which means the U.S. military will almost certainly have continued access to space in wartime.

"Might making more Teslas in China put SpaceX's contracts with various U.S. government agencies at risk?" William Pesek asked in connection with the Musk visit to Beijing.

Pesek, the veteran Tokyo-based Forbes columnist, did not ask that question out of the blue. The Washington Examiner reported in 2020 that both Cory Gardner, the Colorado Republican who then chaired the East Asia subcommittee of the Senate Foreign Relations Committee, and Senate staff were considering whether SpaceX's NASA contracts "represent a potential national security risk due to Chinese financial support for the billionaire owner's electric car company, Tesla."

"What is there to stop them from going to Musk directly and saying, 'We'll call your line of credit early, unless you give us X, Y, or Z?' " said "a congressional Republican aide involved in negotiations over the comprehensive legislation governing the space agency" to the Examiner. "And, there's no real clarity that there's any kind of mechanism that would stop that other than good behavior by an individual."

It is now time for a national conversation in America over Musk's ownership of both Tesla and SpaceX.

"How could America's top leader in technology innovation not understand the risks of a deeper, more entangling relationship with the Communist Party of China?" asked Blaine Holt, a retired U.S. Air Force Brigadier general and technology entrepreneur, in comments to Gatestone. "Musk's recent deal requires future steps that the CCP must approve for Tesla's goals to be realized. Musk should expect China to make demands for technology and data transfers to include Starlink and SpaceX heavy-lift rockets."

"China's April 28 decision to allow Tesla to use Baidu's precise navigation mapping to enable Full Self-Driving and thus remain competitive in the Chinese market is Beijing's way of building leverage over Musk," Richard Fisher of the International Assessment and Strategy Center told Gatestone. "In the meantime, Tesla's relationship with Baidu moves into the area of Big Data and potentially helps Baidu with its artificial intelligence ambitions, which could quickly yield military spinoffs for the People's Liberation Army."

Gardiner's concerns are even more pressing at the moment. "Will Congress now look the other way while the often-used CCP playbook of corporate blackmail plays out, compromising our security?" Holt asks.

It is now time for a national conversation in America over Musk's ownership of both Tesla and SpaceX.

"You have me, and I have you," Chinese Premier Li Qiang told Musk on April 28.

The words, ostensibly meant to show U.S.-China friendship, are in reality a warning. It is now clear that one person so beholden to China should not be so central to America's effort to stay in space.

© Gatestone Institute