Electric vehicle giant Tesla saw a drop in sales of China-made vehicles in July, largely due to a production disruption from the company's ongoing upgrades to its Shanghai factory. The lower figures from the China Passenger Car Association come after Tesla struck new long-term deals last week with two China-based suppliers of battery-materials; however, as geopolitical tensions escalate between the U.S. and China, the future for Tesla and U.S. manufacturing in China is becoming increasingly uncertain. Lewis Black, CEO of Almonty Industries, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Tesla's China Business in Focus as Tensions Increase Between Beijing and Washington

every giant welcome back everyone, Every giant Tesla saw a drop in sales of china made vehicles last month as production was disrupted from the company's ongoing upgrades to a shanghai factory. That's according to new data released by the china passenger car association and it comes after Tesla struck new long term deals last week with two china based suppliers of battery materials. But as geopolitical tensions escalate between china and the US, the future for Tesla and U. S. Manufacturing is becoming increasingly uncertain joining us now. Lewis black ceo of the global mining company. El Monte Industries louis welcome back to the show with Tesla's business being so reliant on china. What impact could these ongoing tensions have on the company's sales moving forward? Well, I think it's it's not just Tesla who are dependent on, on these products from china, I think Tesla is front and center because obviously they are that the global leader of this sector right now, but all levy manufacturers faced the same problem and this is one of the things that people have spoken about in the last 12 months. This diversification is essential because you never really know what's going to happen when your primary source, uh, suddenly loses enthusiasm to work with you. So, Tesla has reportedly suspended production at a Shanghai plan to work on an upgrade that would boost its output by as much as 22,000 cars per week? So, if Tesla does reach its goal, do you think the drop in sales, it's on July because of the shutdown would ultimately be worth it for this company. I think ultimately it's a great growth sector for them and Tesla is a very desirable product. But I think as you said with these tensions, how are the chinese community going to view Tesla's going forward? It's a very clearly identifiable United United States product. And so these geopolitical tensions could also affect sales. Tesla sales drop in china made vehicles comes as china's overall sales of new energy vehicles in july more than doubled from july of last year. What do you make of the surge there? I think that there's probably some good old fashioned patriotism going on where they're basically pivoting more towards locally produced products as well as the fact with all the shutdowns with the Covid lockdowns in shanghai has severely restricted deliveries of raw materials and products for manufacturing. Um, and then you have to question, well who, when they start to reopen, who was getting them first? Tesla's announcement about the new partnership with chinese suppliers of battery materials comes amid that ongoing shortage of these materials kristen and I were talking about this earlier in the show, what does this mean for the future of Tesla this deal? And of course, of course us raw materials companies. Well, I think as long as all the parties respect the deal. I think it's probably a great positive thing. It's a question of he who jumps first wins. I mean Volkswagen had made a very similar deal to this previously about six months ago. So all of the car manufacturers that in the short and medium term the future is from china in terms of the raw materials and the downstream products until the west really starts to ramp up this diversification, you have no choice but to source out of china. Do you think the chips act signed by President biden just today, will do enough to reduce american reliance on china's supply chain for E. V. Minerals and of course those important components. Um I would say almost certainly not because ultimately it didn't really address the raw material part of the equation, it just, you know, addressed the downstream part of it. So I think it's probably a start in the right direction. But I think governments are caught between a rock and a hard place. China bought this market share back in the eighties when they arrived into the sector and all these critical metals sectors with very low priced material. And and it forced basically pretty much every other mind to go out of business And that was buying their market share for 30 years. They protected that market share. Governments faced the reality that if you try now to disrupt that market share, what is the response of China going to be the end of a climate cooperation between Beijing and Washington also came last week very busy after china suspended climate talks with the U. S. Of course after speaker nancy Pelosi's visit to Taiwan. Do you think a transition to a climate competition between the US and china lead to more progress when it comes to the U. S. And developing E. V. Battery materials? Or do you think it will eventually hinder progress? I think it will hinder progress because ultimately you rely on the transparency of the jurisdictions and I think you've seen in many occasions occasions across many different jurisdictions where you say one thing and you actually do another. This is quite frankly all about the virtual monopolies and china has very efficiently over the last 30 years developed supply chains, vertical supply chains that have been extremely well executed. Whereas of course in the west we chose to focus on those items that were more palatable to the electorate than the more mundane business of say, for instance, raw materials, Treasury Secretary Janet Yellen also stating recently that she believes china uses their market position in key raw materials to disrupt US economy and exercise unwanted geopolitical leverage with other comments from Speaker Pelosi. Like we just talked about this week, potentially accelerating tension. She did call him a scared bully. What could the future hold for the U. S. Manufacturing? If tensions with china do increase? Well, it could be very problematic because there is no moment, no other, no other options. I mean, I think what's happened in Russia is a good example, 90% of all the raw materials produced in Russia for export. And yet there's been virtually no disruption of the export of those raw materials because you can't replace them with anything else. China is of a vastly greater scale in these products. And then say, for instance, China is and so I I think that you have to face the reality that you're gonna have to suck it up for now until you come up with a real plan. Um you have no choice but to essentially work with what's available to you, Lewis. Black Ceo of O monte industries. We really appreciate the insight louis. Thank you so much.