As Tesla’s first overseas factory and China’s first wholly owned foreign automotive factory, Gigafactory Shanghai has developed rapidly, thanks to the series of industrial reforms in China and strong support from the Shanghai local government. Gigafactory Shanghai has bolstered Tesla’s manufacturing capacity rapidly and significantly, enabling the company to tap into the growing global demand for electric vehicles, especially after the COVID-19 pandemic. Tesla’s investment has also contributed to the advancement of China’s electric vehicle industry and aligned with the broader goal of technological development and carbon neutrality.
Nevertheless, Tesla’s investment has risks, such as the deterioration of US-China relations, changes in government regulations and policies, competition from other automakers, and the threat of technological obsolescence. The student question revolves around Tesla's ability to defend its leading position in both the Chinese and global electric vehicle markets, with a view to creating a mutually beneficial partnership with the Chinese government.
This case allows students to explore how host country industrial policies affect corporate investment decisions and how to deal with the uncertainties of foreign direct investment. After studying this case, students will be able to discuss the intricate relationship between industrial policies and foreign direct investment.
1. To enable students to understand the industry-level host country determinants that affect a company’s FDI decisions.
2. To allow students to realize the importance of taking government policy into consideration when formulating corporate strategies.
3. To make students understand the benefits a host country may gain from FDI.
4. To provide an opportunity for students to discuss the market opportunities and threats in the host country that a company may be facing in the future.