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Comment by tristanj | Hacker News Reader

Seems like Tesla has been eying this move for over a year. Bloomberg [0] broke this story last year (June 2016) saying Tesla planned to invest $9 billion in Shanghai, according to a 'person with knowledge of the matter'. However, one key point from last year's article is:

Manufacturing in China would allow Palo Alto, Calif.-based Tesla to avoid a 25% import levy, making its electric vehicles more competitive against luxury-brand rivals, such as BMW and Audi, as well as local offerings by BYD and BAIC.

Last year, it sounded like Tesla's motivation to manufacture in China was to avoid this tariff. Now today's WSJ story says Tesla is still likely to pay the 25% tariff. Sounds like Tesla got shafted by Chinese protectionism.

[0] Non-paywalled Bloomberg article http://www.industryweek.com/competitiveness/shanghai-said-be...

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All SEZs (special export zones) are set up like this: they are in China, but technically outside of China for import purposes. So that iPhone that is "made in China" is actually more expensive because it is made in an SEZ and must be imported into China.

Actually going in China would require a JV (joint venture), which would likely siphon off a lot of IP that Tesla wants protected, let alone profits. China is not the champion of free trade that they pretend to be.

Tesla will let you use their patents for free. They will let anyone use them, even direct competitors. There is no charge.

Any other IP could just be reverse engineered, for the most part.

https://www.wired.com/2014/06/tesla-just-gave-all-its-patent...

They don't as of yet, at least not in any real sense.

[1]: > Around the three-minute mark someone asks how many automakers have taken Tesla up on the offer to use its patents, and Musk notes:

>>> Musk: We actually don't require any formal discussions. So they can just go ahead and use them.

>>> Reporter: Is there a licensing process?

>>> Musk: No. You just use them. Which I think is better because then we don't need to get into any kind of discussions or whatever. So we don't know. I think you'll see it in the cars that come out, should they choose to use them.

Sounds nice, but no legal department on Earth is ever going to approve of deliberately using another company's patents without an explicit licensing agreement, no matter what non-legally-binding statements that company's CEO has made. As a sophisticated businessman, Musk is well aware of this fact.

[1] https://www.techdirt.com/articles/20150217/06182930052/elon-...

No legal department on Earth? From what I understand there have been many examples of Chinese companies using clearly stolen IP [1] - pretty sure they would be happy to use these patents.

[1] https://www.nytimes.com/2017/08/15/opinion/china-us-intellec...

That assumes those companies have legal departments.

I don't think the public promise has a super-secret gotcha button which in some hypothetical future Tesla pushes to sue for patent infringement.

Think what you want about Elon, but he made the pledge openly and directly I think that means something.

What if Larry Ellison acquires Tesla in an aggressive takeover? How much are Elon's words worth then?

even after being acquired, a company doesn't absolve of it's obligations to honour contracts (verbal or written).

If Ellison decides to retract said IP waiver, he would have to publically say so, and because the existing IP waiver Musk have provided doesn't seem to include any terms such as termination, i would assume it's an indefinite and perpetual waiver. Hence, Ellison will have to sue (and probably lose) to have existing usages of said IP to be discontinued.

IANAL.

Tell that to Google, who used the verbal agreement of the Sun CEO that they could use the Java API. Taken over by Oracle and now they are sued over it.

A licensing process is different from having a license. I know plenty of companies use open source software. There is no real process for something using something with an MIT license. You can just use it. As someone who has worked as a programmer, Elon Musk would be familiar with that.

Regardless though, the idea that no company would ever use the patents flies in the face of reality:

https://www.usatoday.com/story/money/cars/2014/10/14/tesla-m...

The process is verifying that is has an MIT license! Granted, it's a short process. That's easy to do with a software package. What's the equivalent of a COPYING file for this? Have they published a legally-binding document anywhere? Or would a lawyer say that Musk's public statements were enough?

I am not a lawyer, but something like this might apply: https://en.m.wikipedia.org/wiki/Estoppel#Promissory_estoppel

I'm very hesitant to play lawyer but the first sentence from the second paragraph of that section is, "A promise made without consideration is generally not enforceable."

The joke for companies looking to expand into China is that there will only be one copy of the software or device sold.

Ha Ha, Right? Chinese don't feel the same way about IP as Westerners.

I assure you, as a Westerner, I don't feel the same way about IP in the same insane way that the United Sates Congress does, and tries to impose on the world.

Your link seems to indicate otherwise? Notably, that it will enable Apple and others. They also seem to think it is a legally binding statement, if a little vague.

That was my takeaway, actually.

Patents don't mean much in china, especially American ones, and especially for products that will be used in china and not re-exported to the west.

Not everything can be reversed engineered, for example jet turbines that china still can't produce competitively. Battery tech is probably similar, not to mention software IP.

There's more to IP than patents. I imagine Tesla has a lot of trade secrets wrapped up in their manufacturing processes.

I thought China was part of the WTO and has most favored nation trade status with the US. Does the US have such high import taxes on Chinese goods? I don't think so. Googling around I found this[1] 2014 article about unfair taxes on US cars and a win for the US in the WTO court, but maybe China just ignores that ruling. It does not seem reasonable for the US to allow China to impose taxes and force tech transfer from the US, especially since the US has such a high trade deficit with China. There was some talk about this problem during the US election, but I have not seen any action on the issue yet.

[1] http://www.latimes.com/business/la-fi-wto-autos-china-201405...

Cars are a special thing in US trade deals. Free trade or not, the US auto industry gets special protections. This is also true of other countries (Canada, Europe etc) but is most true of the US.

I think your comment needs a historical perspective. Protectionism and tariffs played an important economic part in the rise of all of the current world superpowers. Pretty much everyone from the USA, to GB to Sweden practiced heavy protectionism through tariffs and subsidies (which also featured in the civil war). While you can pick any window in history and adjudicate whats "fair", the alternative to "Chinese are sneaky" is that they're simply doing what others did before them to become dominant.

If you read my comment I am not talking about "fairness" or advancing some crypto Chinese racism. China is doing great and advancing quickly. Good for them. My perspective was from the other side and questioning weather or not the policy from the US side is a net good for the people in the US, aside from the top 0.01%.

I'm not suggesting you personally harbor ill towards them in a racial way. I could have worded it better, sorry ! My comment was political. A lot of commentators here seem to not understand the historical perspective on tariffs, and subsidies and protectionism.

I think people understand the 'every country will look out for themselves' part. What a lot of people don't is the 'this is what we used to do too' part.

As I understand it, most favoured nation status just means that China has to charge the same tariffs on imports from the US that they charge when importing equivalent items from other countries which they don't have trade deals with. (Which probably rules out most kinds of tit-for-tat tariff policies.)

The ruling was about anti-dumping taxes that China imposed as a retaliation for US imposing anti-dumping tax on Chinese tires. Anti-dumping tax is in addition to regular tariffs. Since China lost the case I assume these anti-dumping taxes were abolished.

Its either 25% import tax, or 50% profit. Chinese are really smart about protecting their own economy.

I personally think it’ll be another 30-50 years before it’s clear whether it’s actually smart or not.

Is that 50 years on top of ~40 years with stagnant wages? I don't think there is time for that.

> Real wages in the United States, have stagnated since the mid-1970s contrary to expectations that real wages should raise in line with increases in productivity. Between 1973 and 2013 productivity in the United States grew by 74% whilst compensation for workers grew by 9% in the same period. The stagnation of real hourly wages has resulted in a Middle-class squeeze as increases in inflation and the cost of living exceeds the growth of real wages for members of the middle and lower classes.

This assertion doesn't pass the smell test, unless you believe that the median working-age US household by income had a worse standard of living in 2013 than it did in 1973.

In reality, the distribution of employment income has shifted from cash wages to expanded benefits. There has been substantial growth in two-earner households which indeed puts downward pressure on individual wages but increases household income and wealth. Productivity gains have resulted in much cheaper goods in a variety of sectors, leading to a couple of decades of historically low inflation. We've also had big demographic shifts in immigration and aging over 40 years that make point-to-point comparisons potentially misleading.

> This assertion doesn't pass the smell test, unless you believe that the median working-age US household by income had a worse standard of living in 2013 than it did in 1973.

Actually you are the first one I see to dispute this. Do you base these smell tests/beliefs in any public data? I would like to see the source to have something to dispute this frequently stated claim.

Let me reverse this: What do you think was better about life for the median working-age US household in 1973? Their house was smaller. Their car was less safe, less reliable and guzzled gas. They had no internet, no mobile phones and only 3 television networks. Eating at a restaurant was a monthly indulgence at best. Air travel was a luxury. Their children could expect to have seven fewer years of life, and were markedly less likely to go to college.

Think about how much someone would have to pay you to live a 1973 lifestyle, and it should be obvious why claiming there have been 40 years of “stagnation” is nonsense.

Nice strawman. Discussion was about real wage growth (vs. productivity gains).

Quality of life != wages

And FYI many people view U.S.quality of life as garbage, so maybe there really is not much growth to brag about.

My guess is it should be obvious much sooner, 20 years or so.

It seems abundantly clear at this point that China's economy is vastly "smarter" than ours, in terms of aligning productive resources to where the country needs them most.

At what cost though.

Is that why China still has hundreds of millions of extremely poor subsistence farmers? Not all of China is Beijing/Shanghai/Shenzhen.

The current number of extremely poor people in China is less than 30 million, less than 2% of population.

From Google:

"According to the World Bank, more than 500 million people were lifted out of extreme poverty as China's poverty rate fell from 88 percent in 1981 to 6.5 percent in 2012, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms."

In 2017 there are around 600 million people in rural area. Their average monthly income is 3300 yuan or around 500 USD, more than $15 a day. Cost of living there is cheap and this is middle income, not poor.

China has radically more extremely poor people than that. The number is closer to 500 million, so long as absurd numbers like $3 per day are not your line.

75% of China's middle class is in the $2 to $10 per day income bracket. And that's their middle class, the bottom 1/3 are even worse off.

https://chinapower.csis.org/china-middle-class/

(Oct 2014)

“Poverty is still a salient problem in China,” Zheng Wenkai, a vice-minister at a government office responsible for poverty alleviation and development, said at a news briefing Tuesday, according to the state-run China Daily newspaper. About 200 million Chinese, or 15% of the country’s population, would be considered poor by international poverty measures, set at $1.25 a day, Mr. Zheng added.

https://blogs.wsj.com/chinarealtime/2014/10/15/more-than-82-...

Two simple questions that make the point easily:

What's the median income, in non-purchasing parity terms, for the bottom 50% of people China?

How many people does China have living below $5 per day, in non-purchasing parity terms?

Answer those please.

I answered the comment which used "extremely poor" and "subsistence farmers" so I used the international poverty line ($1.90). At $3.2 (World Bank's lower middle income poverty line), it was 12.1% or 160 million people, but that was 2013. The number dropped rapidly every year. It should be lower now.

http://povertydata.worldbank.org/poverty/country/CHN

Purchasing parity is a good measure for living standards. You can buy a full meal for 10 yuan or $1.5 in rural China. It is not fair to measure their income with no adjustment. Cooking for a family may cost less than that. $1 in rural China is worth much more than $1 in the US.

Your quotes were from 2014. China is improving every year. You can Google for more recent statistics and quote them here if you disagree.

Wages aren't worth anything without purchasing power parity. You'll have trouble surviving on $10/day in the US (incl. housing) but will be fine in many other regions of the world, including most of India and China.

Why non-purchasing parity? The cost of most goods is significantly cheaper in China, even more so in the relatively poorer rural areas.

Are you asking "why hasn't a country lifted a billion people out of poverty overnight?", or, "why have they only lifted 500 million people out of poverty in 30 short years?"

partly yes, it's managing strategically their move to the city/middle class to a) avoid starvation and b) keeping an healthy supply of fresh internal market

not that I condone the various atrocities and general suffering happening there, but yes from the economical point of view that's why and that also makes sense, as cruel as it might be.

you simply cannot "industrial revoluzionize" a country that big as England did in the 1800. they maybe can do more and faster, but that's very hard to model.

Sure you can and they are are much faster rate. England had growthof 1.3% during the industrial recolution. That was rapid growth back then. China has been doing 10% for many years.

So what England did is not impressive by todays standard. Event the most backwards developing countries today can achieve that growth rate.

gdp growth != rate of urbanization

>Chinese are really smart about protecting their own economy.

So is the West. Ironically, the USA was one of the most protected economies around the second world war. And GB before that.

Why is it dangerous to allow the Chinese people to buy Tesla cars at market price?

To protect their local EV industry, no doubt, which they apparently want to protect because: "China is encouraging and supporting the development of alternative energy options, especially in terms of electric-vehicle development, because they anticipate the rise of new fuel technologies and greater fuel efficiency will give them greater energy independence." [1]

[1] https://en.wikipedia.org/wiki/Electric_vehicle_industry_in_C...

Another non paywalled archive: http://archive.is/nRchr

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