Opinion: Elon Musk says Tesla may open a plant in Russia. Why it sounds like a fantasy
Positive signs about Russo-American relations are a rare thing now. Tesla CEO Elon Musk defied this trend and injected a note of optimism last week by saying he was exploring the possibility of opening a Tesla factory in Russia. “I think we’re close to establishing a Tesla presence in Russia, and I think that would be great,” Musk said on May 21, speaking at a festival for students in Moscow via a video call.
Although most of Musk’s achievements in space have not impressed Russian authorities (or they just pretend not to be, given that the success of Musk’s SpaceX threatens the Russian monopoly on manned flights to the International Space Station), his intention to build Tesla cars in Russia has noticeably excited officials there. The ministry of industry and trade invited the American billionaire to Russia to discuss the project. Meanwhile, authorities of five Russian regions, including Moscow, are already competing to provide Musk the land, mimicking the behavior of state leaders when Musk announced plans in 2014 to build a giant battery factory in the Western U.S. (Nevada won that bidding war.)
But why would Musk suddenly be considering Russia, where there is almost no interest in electric cars? According to the car market research agency Autostat, by Jan. 1, there were fewer than 11,000 electric vehicles registered in the country (less than 0.2% of all passenger cars in Russia). In total, there are only 700 Tesla vehicles in Russia. It is a drop in the ocean for Tesla, which sold around 500,000 vehicles last year. The main reasons electric cars are not popular in Russia (and won’t be in the near future) are their high prices and the limited availability of charging stations.
Musk may be looking now for greener pastures because Tesla is experiencing problems with governments in two of the countries where it has major investments, China and Germany. The tech entrepreneur said he had to delay the factory opening in Berlin until late 2021 because of the German “bureaucracy.” Meanwhile, the Chinese government has berated Tesla about alleged quality and service problems, and more recently raised concerns about the cars spying on government facilities. According to the Wall Street Journal, the Chinese government banned Tesla vehicles for the military because of the worries that the cars’ cameras could record sensitive information.
But if Musk hopes to escape those challenges with a new plant somewhere else, Russia hardly seems like the right place for him to do so. Because of the notorious layers of bureaucracy, Russia usually gets one of the lowest scores in “open for business” rankings. And the accusations of spying could easily happen to Tesla in Russia, given that Russian officials do not trust American tech companies and try to limit foreign software purchases by government structures.
Overall, Russia doesn’t appear to be an attractive market for Tesla now. It’s conceivable that Musk has floated the idea of opening a plant just out of courtesy. The billionaire was asked about starting production in Russia by an audience member who called himself Musk’s biggest Russian fan, owning several Tesla vehicles. Musk may simply have been trying not to disappoint a customer, choosing to give him an answer that, frankly, was as vague as his answer to the question about what the next 50 years would look like. Since there were no details provided, opening a Tesla factory in Russia so far sounds like a fantasy.
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