US House committee chair ‘concerned’ by Tesla deals in China

By Michael Martina and Patricia Zengerle

WASHINGTON (Reuters) – The leader of a U.S. congressional committee on China said on Monday he was concerned about electric carmaker Tesla Inc’s dependency on China, a day after the company revealed plans to open a Megapack battery factory in Shanghai.

Tesla announced the factory in a tweet on Sunday, and Chinese state media said it would initially produce 10,000 Megapack units a year, equal to around 40 gigawatt hours of energy storage, and complement a huge existing Shanghai plant making electric vehicles.

Mike Gallagher, the Republican chair of the House of Representatives’ select committee on China’s Communist Party, said he would like to know how Tesla’s CEO Elon Musk balances U.S. government support for Tesla and its operations in China.

“I’m concerned about this,” Gallagher told Reuters when asked about the battery factory.

“Tesla seems entirely dependent, A, on the largesse of the federal government via tax breaks, and B, upon access to the Chinese market,” Gallagher said.

“The sort of deals they’ve struck there seem very concerning. I’d just be curious to know how Elon Musk balances both of those,” he said, adding that Musk’s space flight venture SpaceX was by contrast a “massive success story.”

Tesla did not immediately respond to a request for comment on Gallagher’s remarks.

Musk responded to criticism on Twitter on Sunday, saying in a tweet that “Tesla is increasing production rapidly in Texas, California & Nevada.”

The company’s Shanghai factory accounted for more than half of the automaker’s global production in 2022. Tesla generated $18.15 billion in revenue from China last year, accounting for over one fifth of its total revenue.

Tesla’s plans to open the Megapack factory come amid growing tensions between China and the U.S. and a push by Beijing to woo foreign firms back after the country’s extended COVID-19 lockdowns battered its economy.

‘THINK ABOUT SUBPOENAS’

Gallagher met last week in California with technology and entertainment companies – including Apple, Alphabet Inc’s Google and Disney – about their business dealings in China.

His select committee, which Republican House Speaker Kevin McCarthy created in January, has sought to convince Americans of the need to forcefully compete with China and to “selectively decouple” the U.S. and Chinese economies in certain strategic industries.

Gallagher said he hoped to engage with Tesla and other companies going forward, but suggested he could require corporate executives to testify if his investigation into their ties to China were stymied.

“If we reach roadblocks and we get to a point where lawyers are getting involved with answers, that’s when you start to think about subpoenas,” he said.

Three sources at large U.S. companies, from technology to retail, told Reuters they are anxious about the prospect of their executives being called to testify about business operations in China and face questions such as whether their companies use supplies produced in China with forced labor.

Gallagher said he was aware executives from a range of businesses might be concerned about testifying.

“It could be a major asset manager on Wall Street. It could be a movie star or a high-powered producer. It could be the CEO of a big tech company. If they want to do business in China, there are certain questions nobody wants to be asked,” he said.

Gallagher declined to discuss the topics of the committee’s upcoming hearings, but said he was on a “tight timeline.”

So far the committee has held two hearings, one framing “existential” U.S.-China competition, and the other on Chinese government abuses toward Muslim minorities in its western Xinjiang region.

(Reporting by Michael Martina, Patricia Zengerle. Additional reporting by Hyunjoo Jin in San Francisco; Editing by Don Durfee and Josie Kao)