It seems to me that a big part of the big companies in the world have used China to create higher profits for a while, have moved their main manufacturing there and are now suffering the consequences.
I always wonder why companies don't think ahead. But maybe it's just the structure of corporate businesses that require short-term profitability over long-term thinking. But you can see a similar pattern now play out with AI - companies laying off people, use AI to replace them and increase the profits short term. The issues will just crop up a little bit later.
10.22% of the cars registered in Spain in 2025 were Chinese, meaning that just over 1 in every 10 vehicles sold came from the Asian country. This represents a 50% increase compared to 2024. In total, we are talking about 117,341 cars.
Hey, great read as always. Loved how you explained the "honorable discharge" bu could you elaborate a bit on that "transfer of learning" from Fremont to China?
Thanks for the kind words—I'm glad the "honorable discharge" framing resonated. Fremont was Tesla's original proving ground: the old NUMMI plant, retrofitted for high-mix/low-volume premium cars (S/X) then scaled for Model 3/Y. Shanghai took those hard-won lessons in gigacasting, automation, vertical integration, and rapid line reconfiguration—but applied them at a scale and speed Fremont never achieved. Shanghai's upgrades (e.g., doubling capacity post-2022) showed how to run a factory at world-class efficiency with lower costs. In fact, in 2022 Tesla even sent ~200 Shanghai engineers and production staff to Fremont temporarily to help retool and boost output there—essentially reverse-transferring some of the China-optimized processes back to the U.S. This highlights how the learning flowed both ways, but the bigger, more sustained gain went to the Chinese ecosystem.
Interesting analysis. But is it all hypothetical or speculative, especially in light of the final comment that, "the future of this move remains obscured by regulatory uncertainty"? And in 2026, regulatory uncertainty is not the only uncertainty by any stretch.
Thanks for taking the time to think about this. The events described are real, not hypothetical. And, of course, the future is always speculative. The point of diagnosis is to understand the forces at work in a situation.
This appears to be a case of a reverse war of attrition (RWoA): a WoA in which payoffs are effectively sign-reversed (the laggard is penalized rather than rewarded).
To the best of my and Grok/ChatGPT’s knowledge, I have recently introduced this RWoA structure to explain the strategic rationality of sticky prices under perfect information and without menu costs or information frictions:
The term “RWoA” itself was previously used by Seel (2016), but in a different setting and without payoff sign-reversal.
More broadly, it seems that real-world strategic situations resemble RWoA more often than standard WoA (e.g. replacement of still-profitable legacy products or systems, and procrastination in irreversible decisions).
It seems to me that a big part of the big companies in the world have used China to create higher profits for a while, have moved their main manufacturing there and are now suffering the consequences.
I always wonder why companies don't think ahead. But maybe it's just the structure of corporate businesses that require short-term profitability over long-term thinking. But you can see a similar pattern now play out with AI - companies laying off people, use AI to replace them and increase the profits short term. The issues will just crop up a little bit later.
10.22% of the cars registered in Spain in 2025 were Chinese, meaning that just over 1 in every 10 vehicles sold came from the Asian country. This represents a 50% increase compared to 2024. In total, we are talking about 117,341 cars.
Crazy
Hey, great read as always. Loved how you explained the "honorable discharge" bu could you elaborate a bit on that "transfer of learning" from Fremont to China?
Thanks for the kind words—I'm glad the "honorable discharge" framing resonated. Fremont was Tesla's original proving ground: the old NUMMI plant, retrofitted for high-mix/low-volume premium cars (S/X) then scaled for Model 3/Y. Shanghai took those hard-won lessons in gigacasting, automation, vertical integration, and rapid line reconfiguration—but applied them at a scale and speed Fremont never achieved. Shanghai's upgrades (e.g., doubling capacity post-2022) showed how to run a factory at world-class efficiency with lower costs. In fact, in 2022 Tesla even sent ~200 Shanghai engineers and production staff to Fremont temporarily to help retool and boost output there—essentially reverse-transferring some of the China-optimized processes back to the U.S. This highlights how the learning flowed both ways, but the bigger, more sustained gain went to the Chinese ecosystem.
It sounds like Tesla vs China is similar to the mini mills squeeze out the steel factory in Clayton Christensen ‘s disruptive theory. https://youtu.be/Ei57yFEljrI?si=gxw_OLccrR0tEDZN
Interesting analysis. But is it all hypothetical or speculative, especially in light of the final comment that, "the future of this move remains obscured by regulatory uncertainty"? And in 2026, regulatory uncertainty is not the only uncertainty by any stretch.
Thanks for taking the time to think about this. The events described are real, not hypothetical. And, of course, the future is always speculative. The point of diagnosis is to understand the forces at work in a situation.
Very insightful — thank you.
This appears to be a case of a reverse war of attrition (RWoA): a WoA in which payoffs are effectively sign-reversed (the laggard is penalized rather than rewarded).
To the best of my and Grok/ChatGPT’s knowledge, I have recently introduced this RWoA structure to explain the strategic rationality of sticky prices under perfect information and without menu costs or information frictions:
https://github.com/KazStanczak/sticky-prices-a-reverse-war-of-attrition/blob/a7ee62dfaaad42b796a98c16643beef21b05db78/Sticky_Prices_as_a_Reverse_WoA_WIP_Stanczak_12212025.pdf
The term “RWoA” itself was previously used by Seel (2016), but in a different setting and without payoff sign-reversal.
More broadly, it seems that real-world strategic situations resemble RWoA more often than standard WoA (e.g. replacement of still-profitable legacy products or systems, and procrastination in irreversible decisions).