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Competition from Chinese EV automakers may be starting to hit Elon Musk and Tesla. After a long battle for market share in China, Tesla’s CEO has warned his fellow automakers that “on a level playing field, Chinese automakers will compete with just about everyone else.”
“In general, our view is that Chinese car companies are the most competitive car companies in the world,” Musk said during Tesla’s earnings conference Wednesday. “If trade barriers were not established, most car companies around the world would go out of business,” he continued.
Musk’s views on Chinese EVs have changed significantly since 2011, when he downplayed the quality of cars made by companies like BYD. Last May, he acknowledged that BYD’s cars are “very competitive.” And in November, he suggested that the world’s top 10 automakers could end up being Tesla and nine Chinese automakers.
Tesla, an industry pioneer, faces stiff competition from BYD. The Chinese EV maker replaced Tesla as the world’s best-selling EV brand in the final quarter of 2023. BYD sold 526,409 pure electric vehicles in the October-December period last year, outselling Tesla by about 40,000 units during the same period.
The Chinese government has lavished manufacturing subsidies on China’s EV sector in an effort to develop a globally competitive industry. This government support is currently under scrutiny from Western lawmakers.
Last September, the European Commission launched an anti-subsidy investigation into Chinese EV brands. A few months later, the Biden administration exempted vehicles with Chinese-made battery parts from the consumer tax credit. (Tesla sources some parts from Chinese battery maker CATL).
The United States imposes a 25% tariff on cars imported from China, in addition to the general 2.5% tariff on all auto imports. The Trump administration imposed tariffs on China, and the Biden administration extended them.
The European Union currently imposes a 10% tariff on imported cars. China also imposes import duties on foreign-made cars depending on their origin.
In China, the world’s largest EV market, Tesla is competing not only with BYD but also major automakers like GAC Group, startups like Nio and Xpeng, and even tech companies like mobile phone maker Xiaomi. Facing numerous competitors.
US automakers continue to cut prices to gain market share, contributing to a price war in China in early 2023. The US automaker lowered the prices of the Model 3 and Model Y again earlier this month.
Tesla on Wednesday did not provide a full-year outlook target and warned of slower growth next year. The company’s stock price fell 6% in after-hours trading.