Tesla's Controversial Legal Strategy in China: Suing Customers and Critics

Tesla has taken an assertive legal approach in China, targeting its own customers to silence criticism. Zhang Yazhou, a Tesla owner, publicly claimed her Model 3's brakes failed in 2021, causing an accident that injured her parents. Tesla disputed this and sued her for defamation. A Chinese court ruled against Zhang, ordering her to pay over USD 23,000 and apologise publicly.

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"I refuse to accept it," said Zhang, who appealed the verdict. "As a consumer, even if I said something wrong, I have the right to comment and criticise. I spoke about my feelings as a user of the car. It has nothing to do with damaging their reputation."

Legal Success in Chinese Courts

Tesla's record in China highlights its ability to thrive in a system where regulators and media are aligned with the ruling Communist Party. Unlike most automakers, Tesla has successfully sued its customers in China. This strategy has helped Tesla limit accountability while benefiting financially.Over the past four years, Tesla has pursued legal action against at least six car owners in China who reported vehicle malfunctions or accidents due to mechanical failures. The company also targeted bloggers and media outlets critical of it. Tesla won all eleven cases where verdicts were available, with two judgments under appeal.

Political Support and Business Growth

Tesla's success in China is partly due to support from Li Qiang, former Shanghai party boss and now China's premier. Under his leadership, Tesla built its first overseas factory near Shanghai in 2019. This support allowed Tesla to retain full control over its Chinese operations and receive various benefits like low-interest loans and tax breaks.In January 2020, Elon Musk unveiled the first Chinese-made Teslas in Shanghai. That year marked Tesla's first annual profit and Musk becoming the world's richest person. Bill Russo of Automobility Ltd. noted Musk's strategy of gaining influence with key figures to achieve his goals.

Media Coverage Constraints

Media coverage of Tesla in China faces restrictions. Two journalists revealed an unwritten rule discouraging negative reporting on Tesla due to its importance to the Shanghai government. Those who defy this face legal consequences; for instance, PingWest apologised and paid damages after calling Tesla's factory a "sweatshop."Tesla also stands out for pursuing legal action against car owners involved in crashes. Feng Shiming, an auto blogger and Tesla owner, was ordered by a Shanghai court to pay Tesla after writing about alleged brake failures. "Tesla used their legal advantages to bully Chinese car owners," he said.Tesla's aggressive legal tactics in China have been effective in silencing critics and maintaining its reputation. The company's success is bolstered by political support and favourable conditions within the Chinese legal system. However, this approach has raised concerns about stifling free speech and consumer rights in the country.