Elon Musk courts EU leaders as Twitter’s future hangs in the balance

On Thursday, Elon Musk strode into the Palazzo Chigi in central Rome for a visit with Italian Prime Minister Giorgia Meloni.

Musk’s top-level meetings haven’t always gone smoothly. (Bloomberg)

On Thursday, Elon Musk strode into the Palazzo Chigi in central Rome for a visit with Italian Prime Minister Giorgia Meloni. Wine, hugs and small talk were exchanged over the course of several long meetings, but the billionaire refrained from making any promises – or letting any details slip about where he's likely to locate Tesla Inc.'s next European factory.

Musk then traveled to Paris to meet with French President Emmanuel Macron – their second rendezvous in just over a month. With billions at stake in potential investment, EU leaders are jockeying to win over the world's richest man. France and Italy aren't his only suitors: Tesla is also reportedly in talks about a factory in Spain.

While his meetings with leaders from across the political spectrum have focused largely on Tesla, another Musk company has loomed large in the background: Twitter, whose collapsing moderation standards have endangered its future in Europe.

This charm offensive also comes as Musk's sole factory on the continent, outside Berlin, has been ramping up more slowly than anticipated due to pushback from environmental groups and Germany's copious red tape. These complications have led some to speculate that he's shopping around for a more favorable site for his next local plant. While it's unlikely he needs one for Tesla's existing product lines, the company is working on a next generation of lower-cost electric vehicles.

Musk's top-level meetings haven't always gone smoothly. In Italy, between discussions about artificial intelligence and the automotive sector, the father of 10 voiced concerns to Meloni about the country's low birthrate. In France, talk of a prospective battery factory has been shadowed by controversy over Twitter. Just three weeks ago, Macron's minister for digital affairs warned that if the social media giant did not comply with the EU's new content moderation rules by the end of August, it would risk fines, and eventually, a possible EU ban.

This is all happening at a moment in which European leaders are especially eager to attract investment. The clean-technology incentives in President Joe Biden's landmark climate bill, the Inflation Reduction Act, are fueling concerns that Europe will fall behind in the race to attract production of EV components.

Italy has struggled to secure commitments from large US tech investors, and has held preliminary talks with Taiwan-based companies to boost its chips capabilities. Discussions with Intel under former Prime Minister Mario Draghi failed to result in a deal, and Meloni's recently unveiled “Made in Italy” approach is likely to raise questions about why an American company should funnel investment to a country focused on prioritizing domestic businesses.

Macron, meanwhile, has been trying to lure companies like Twitter by branding Paris as a tech hub. While he has criticized Musk in the past for failing to protect kids on Twitter, the men do have other matters to discuss: Tesla has pledged to purchase nickel from a struggling state-supported plant in New Caledonia, a French territory in the South Pacific, and SpaceX has a deal to launch satellites for the Paris-based operator Eutelsat SA.

More than anything, Macron's government has said it wants to lure Musk into building an electric-car factory in France. The French President is trying to make northern France, formerly an industrial stronghold, into an EV and battery-making hub.

While Musk has not visited Spain on official business, he was invited last year by Socialist Prime Minister Pedro Sanchez after calling on the Spanish government – via a tweet – to increase its investment in solar energy. Local media reported earlier this month that Tesla is in discussions over building a battery plant in the coastal region of Valencia. Neither the government nor the company have confirmed or denied.

Spain has been seeking to expand its battery and electric vehicle production capacity to help offset an anticipated drop in combustion-engine cars. VW has announced plans to build a $7.7 billion electric car hub in Valencia.

After meeting with Macron last month and saying he had been “impressed” by the leader, Musk promised to invest in the country soon. But on Friday, after meeting again with Macron and being interviewed onstage at a tech event in Paris where he giggled and spoke about the meaning of life, Musk stoppped short of announcing anything concrete.

Asked about regulators' push for content moderation on Twitter, Musk appeared resigned and indifferent. “There's plenty of regulators. Sure,” he said, dismissively. He later repeated claims that Twitter has made dramatic improvements to moderation of content that's exploitative of children, contradicting academic research that's described the company as having regressed. There was no talk of his building a factory in France, a possibility he and Macron had discussed. Scrutiny will be intense when Musk speaks on French TV on Monday evening, as reported by Le Parisien.

Musk has had little trouble securing face time with world leaders, be it in person or virtually. In just the last six months, he's met with Mongolia's prime minister, multiple central government officials in China and the presidents of South Korea, Mexico and Turkey. Indonesian President Joko Widodo has openly tried to woo Musk over the past year and convince him to make both cars and batteries in the country.

But talk of more Tesla plants is a bit counterintuitive, considering the significant amount of carmaking capacity the company has already added recently. It's now able to make more than 2 million vehicles annually — roughly double what it was capable of just over a year ago.

Tesla has been struggling to increase vehicle sales as rapidly, with production outpacing deliveries each of the last four quarters. While deliveries of the Model Y have continued to climb, the company's other models have underperformed. First quarter sales of the Model 3 in Europe sagged 40% from a year ago, according to researcher Jato Dynamics.

This supply-demand mismatch is the reason Musk massively slashed EV prices in the US, China and Europe earlier this year. The company is also planning to cut shifts and let go of temporary workers at its German factory, Business Insider reported this week.

In a sign Tesla has more inventory issues to work through, the carmaker just started offering three months of free fast-charging in the US to clear Model 3 sedans off its lots before the end of the quarter.

The idea Tesla would consider building a battery plant also is somewhat of a surprise, given the challenges it's had manufacturing its own cells and its decision earlier this year to indefinitely put off producing them in Germany.

In September 20202, Musk staged an event to tout Tesla's plans to make thicker, more voluminous batteries to supplement the ones it sources from makers such as Panasonic Corp. But relative to what Musk predicted, his company's actual output has fallen far behind schedule.

“It's a very hard path,” Musk said during Tesla's annual meeting last month, ultimately neglecting to answer a question about when the company will be able to pull off what he promised almost three years ago.