Elon Musk warns Chinese automakers set to drive global rivals off the road

Tesla CEO Elon Musk issued a stark warning, predicting that Chinese automakers will demolish global competition if trade barriers are not enforced. This statement highlights the intense pressure the leading American electric vehicle (EV) company faces from Chinese rivals such as Build Your Dreams (BYD), which are rapidly expanding their global presence.

Musk’s warning follows recent developments where BYD, supported by Warren Buffett, surged ahead of Tesla as the top-selling EV manufacturer worldwide in the last quarter. This achievement is despite Tesla’s aggressive price reductions projected to last until 2023.

The 52 year old businessman praised Chinese car makers, describing them as the most competitive and predicting they will achieve significant success internationally, depending on the establishment of tariffs or trade barriers.

Musk, who holds the title of the world’s wealthiest individual in 2023, has reason for his apprehension. Last year, he initiated a price war designed to attract customers facing high borrowing costs. This move, however, squeezed Tesla’s profit margins and raised investor concerns. The South African-born investor voiced concerns yesterday, January 24, about Tesla reaching the natural limit of cost down with its current product range.

Tesla plans to counter this by launching a more affordable, mass-market compact crossover, codenamed Redwood, by mid-2025. This move is designed to compete with lower-cost competitors, and Musk confirmed Tesla’s intentions to start production of its next-generation EV at its Texas factory in the second half of 2025.

However, Chinese EV manufacturers, known for their cost-efficiency and stable supply chains, are progressing rapidly. Due to increased competition and excessive capacity within China, many are focusing on accelerating the expansion of their international presence.

SAIC Motor, for example, has been expanding its fleet of vehicle vessels to counteract shipping costs as it seeks to boost overseas sales.

Chinese automakers

Spencer Imel, a partner at consumer insights firm Lansgton, noted that although Chinese automakers such as BYD and Nio may not be leaders in terms of reliability, durability, and safety, they do enjoy high demand in China thanks to innovative features like in-car technology and battery swapping.

“That, we believe, will be an important ingredient and a differentiator in their future growth overseas.”

Imel pointed out that Chinese car companies still have very low brand recognition in the United States.

Musk’s comments also coincide with the upcoming US presidential election. Current President Joe Biden has stated that China is determined to dominate the EV market, a development he is committed to preventing, reported Bangkok Post.

Former President Donald Trump, who is seeking the Republican nomination for president again this year, has indicated that he would intensify tariffs if elected, proposing a universal 10% tariff on all imports into the US and revoking China’s most-favoured-nation trading status.

On Wednesday, Musk stated that while there was no obvious opportunity to collaborate with Chinese competitors, Tesla was open to providing them access to its charging network and licensing other technologies, such as autonomous driving.

This news follows Europe’s protectionist stance towards Chinese EV manufacturers, with the European Commission launching an investigation last year into whether to impose punitive tariffs to protect European Union (EU) producers against cheaper Chinese EV imports alleged to be benefiting from state subsidies.

In the competitive EV market, European, American, and South Korean automakers sought fair treatment in Thailand’s promotion policies amid concerns of advantages for Chinese and Japanese rivals.