Even this Chinese CEO Who’s Benefiting From Trump’s Trade War Says It’s a Dumb Idea - TIME

Even this Chinese CEO Who’s Benefiting From Trump’s Trade War Says It’s a Dumb Idea

Posted: 12 Sep 2018 10:25 PM PDT

Li Bin has many reasons to be happy. Seeing the Chinese government’s backing for green tech, he teamed up with a former Ford executive to launch high-end electric vehicle firm NIO, which has been dubbed China’s answer to Tesla.

NIO’s first model, the jaw-dropping ES9, broke speed records at the famed Nürburgring racing track in Germany. On Thursday, the Tencent-backed firm generated $1 billion at its IPO in New York, putting its overall value at $6 billion. (Though less than earlier estimates of $8-9 billion.)

Meanwhile, NIO’s chief rival is having major problems. Tesla was forced to raise prices on its vehicles in China by 20% after Beijing boosted tariffs on American vehicles in retaliation for President Donald Trump’s hike on $34 billion of Chinese exports. The American firm’s stock has dropped more than a quarter from their high point last year. It is also facing lawsuits for alleged fraudulent company statements. And there were more legal woes after CEO Elon Musk’s bizarre and baseless accusation that a British diver, whom helped rescue a stranded football team from a cave in northern Thailand in July, was a “child rapist.”
More bad news appears on the way. On Friday, Trump said tariffs on an another $200 billion in Chinese imports would be inked “very soon.” He added that an additional $267 billion in Chinese goods were “ready to go on short notice.”

This should be music to Li’s ears. Beijing’s economic ministry spokesperson, Gao Feng, has said that “China will be forced to roll out necessary retaliatory measures,” which would seem to further boost NIO’s competitive advantage. Already, NIO’s ES8 electric SUV sells for $65,000, or around half the China road price of the most basic Tesla Model X.

Li, however, didn’t become a billionaire by ignoring the bigger picture. “There is no real winner in a trade war,” the NIO CEO tells TIME. “I believe a reasonable world leader should possess the wisdom to avoid a trade war instead of causing one.”

Read More: Things Are Not Going to Plan in Trump’s U.S. Trade Deficit Wars

Trump campaigned that unfair trade with China costs American jobs. The former reality television star took particular aim at America’s current record $375.2 billion trade deficit with China, as well as Intellectual Property (IP) theft that the U.S. Trade Representative estimates costs between $225 billion and $600 billion annually.

Li, however, points to NIO’s more than 300 patents on battery replacement technology — which allows a NIO power source to be swapped out in just three minutes — as evidence Chinese firms now lead rather than steal technology.

“Objectively speaking, a long time ago there some rogue players in China that didn’t have enough respect for IP,” he says. “But today, I don’t see any of the major U.S. IP holders accusing China.”

In fact, adds Li, some of America’s largest firms — such as Apple, Cisco and Intel — make huge profits from the Chinese market. “If these big IT companies were to complain about IP violations, then the accusation might hold some truth,” he says. “But I haven’t see any. People should look at the facts and stop judging China on outdated stereotypes.”

The importance of the Chinese market to U.S. firms is undeniable. Apple made $9.6 billion in revenues from greater China in the June quarter, helping the Cupertino behemoth to hit its recent $1 trillion valuation. China’s strident state media has warned such success provide Beijing with “bargaining chips” and suggested a trade war could make Apple “a target of anger and nationalist sentiment.”

China is also the world’s largest auto market with more than 28 million vehicles sold last year. Annual sales are forecast to grow steadily while the U.S. and European markets shrink. Tesla’s Chinese revenues doubled last year to over $2 billion, comprising almost 20% of the firm’s total income. In July, Tesla inked a deal to open a factory in Shanghai capable of producing 500,000 cars a year.

For Washington, that deal is bittersweet. On the one hand, it marks the first time a U.S. automaker has been permitted to set up shop in China without partnering with a Chinese firm. In April, Beijing agreed to scrap 50% local partnership rules on electric vehicle makers in 2018 and larger passenger vehicle market by 2022.

This is exactly the sort of increased market access U.S. firms been clamoring for in line with WTO rules, and seen as a positive response to Trump’s vitriolic attacks on Chinese trade practices. But the downside is that these are manufacturing and assembly-line jobs that would likely have remained in the U.S.

Telsa may also find itself targeted by increased regulations if Sino-U.S. relations spiral, and would not have the help negotiating China’s Kafkian red tape that partnering with a local company provides.

The risks are enough to boost NIO’s credentials despite the firm only having delivered 2,000 cars to date, and not even having a license to build its own vehicles. (It instead uses a plant by state-backed Anhui Jianghuai Automobile Group Corp.) In fact, NIO recorded just $7 million in sales over the first half of this year, posting a loss of $503 million.

Li, however, is confident of turning this around, saying Trump’s resurgent trade nationalism flies in the face of today’s globalized world. NIO, for one, is headquartered in Shanghai, Munich and San Jose, Calif. It has 6,000 employees from over 40 countries, including 200 from Europe and 600 recruited from Silicon Valley, plus key backers from Taiwan.

“How can you define the ownership of such company?” asks Li. “From our first day we’ve seen ourselves as a global startup.”

—With reporting by Zhang Chi/Shanghai