Musk: “Chinese car companies are the most competitive car companies in the world. If there are no trade barriers established, they will pretty much demolish most other car companies in the world. They’re extremely good.”
Tesla founder and CEO Elon Musk has warned that Chinese automotive brands will “demolish” global rivals without trade barriers.
Chinese manufacturers, who have shifted focus to EVs, have made huge progress in recent years into Europe and North America with aggressive pricing And in the last quarter of 2023, Chinese EV giant BYD, which is backed by Warren Buffett’s Berkshire Hathaway, sold more electric vehicles than Elon Musk’s Tesla as the two battled for top spot in the sector.
In November, Musk suggested that in the future, the 10 best-selling car makers would be Tesla and nine Chinese manufacturers. Speaking yesterday (January 24) at Tesla’s earnings calls in Palo Alto, USA, he told his audience he believes tariffs will be the only way legacy manufacturers will survive.
“Our observation is generally that Chinese car companies are the most competitive car companies in the world,” said Musk. “If there are no trade barriers established, they will pretty much demolish most other car companies in the world. They’re extremely good.”
Major Chinese firms benefit from cheaper production costs and greater access to materials needed to manufacture batteries, putting them ahead of the competition and many European and US vehicles rely on batteries made in China.
Elon Musk also explained that manufacturers from China will have “significant success” outside of China, but it depends on the tariffs or trade barriers in place.
The Shenzhen-based manufacturer BYD sold a record 526,000 battery-only vehicles compared to 484,500 Tesla EVs. BYD also sold more than three million “new energy vehicles” through electric cars and hybrids across 2023.
In the past US investor in BYD Warren Buffet had downplayed the threat of Chinese cars. In 2011 he pointed out that the quality of vehicles from China, including BYD were lower quality than their European and US counterparts.
He has since backtracked on those comments, adding that BYD – which stands for Build Your Dreams – was “highly competitive”.
In November 2023, Musk suggested that in the future, the 10 best-selling car makers would be Tesla and nine Chinese manufacturers.
Tesla has begun aggressive price cutting beginning in the USA in December and then in Europe this month, which has upset some drivers who’d already bought. But it is clear he intends to survive the Chinese onslaught and aim for top EV spot worldwide.
According to Reuters, Tesla now has plans to start producing a cheaper, mass-market electric vehicle, codenamed “Redwood” believed to begin production in the second half of 2025.
The next-generation EV is expected to be manufactured at the company’s Texas factory.
Previous reports suggested that Tesla was looking to launch a cheap, sub-$28,000 electric car, with production of the vehicle being supported by the Berlin Gigafactory.
Gary Clyde Hufbauer is Senior Fellow at the Peterson Institute for International Economics, analysed the growth of Chinese EV manufacturing in a well-respected article last November under the headline China’s electric vehicle surge will shock global markets on the EastAsiaForum.org
He wrote: “In 2022, China produced almost 60 per cent of the world’s EVs — both battery electric vehicles and plug-in hybrid vehicles. In 2023, production it expected to reach 8 million units, or 25% of all cars sold in China compared with 22% in the European Union, just 6% in the United States, and a measly 3% in Japan. Chinese firms also offer 90 different EV brands at proces ranging from US$5000–90,000. The average EV in China cost around €32,000 (US$53,800)in 2022, compared to an average of €56,000 (US$94,100)in Europe.”
He concluded: “Many countries in the Global South will welcome less expensive Chinese EV brands. But to slow Chinese EV dominance, advanced countries are almost certain to raise existing barriers or impose quotas that limit the Chinese share of the market. EVs could well exemplify the fragmentation of world trade.”
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Tesla slashes Model Y prices across Europe January 17, 2024
Tesla recalls more than 1.6m cars in China over problems with autopilot and locks January 9, 2024
China’s BYD overtakes Tesla to become top electric vehicle seller January 4, 2024
