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Elon Musk sparks strong reaction with first visit to China in 3 years: A 'price war [is] underway'

Tesla expanded its business dealings with Chinese companies even further recently.

Elon Musk visits China to tour 'Gigafactory'

Photo Credit: Getty Images

Tesla CEO Elon Musk recently made his first visit to China (in about three years), and the markets responded positively.

MarketWatch reported that Tesla stock rose 4% in anticipation of Musk's trip, during which he toured Tesla's Shanghai "Gigafactory."

"With Giga Shanghai now producing over 80k units per month, the production scale and scope of Tesla in China remains one of its key advantages as Musk & Co. face increasing domestic competition from the likes of BYD, Nio, Xpeng, and others with an EV price war underway within the country," financial analyst Dan Ives told MarketWatch.

The Tesla factory in Shanghai hosts the final assembly of the Tesla Model 3 and Tesla Model Y.

Tesla expanded its business dealings with Chinese companies even further recently, partnering with one company that was supplying battery cells for some of its models, as Tesla was unable to keep up with its own production demands. 

Unfortunately for U.S. customers, that meant that cars with those batteries wouldn't qualify for the tax credit available to electric vehicles (EVs) whose batteries were made in the United States. As of early June, though, all Model 3 and Y cars qualify for up to a $7,500 credit, as Forbes reported.

While Chinese EV companies will almost certainly be a major competitor for Tesla in the future — one such company, BYD, is expected to come out with an EV called the Seagull that costs only $11,200 — those companies are currently taking a cautious approach toward expanding into the United States due to political tensions between the two countries.

Of course, if and when the Seagull does make its way to the U.S. market, it will occupy a very different space from Tesla, which is categorized as a "luxury electric car." 

Chinese scientists have also been making great strides in developing alternatives, such as sodium-ion batteries. Lithium mining is one of the least environmentally sustainable aspects of EV manufacturing, and lithium supply for batteries is one of the main "limiting factors" Musk has given for EV production to keep up with demand.

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