The electric vehicle (EV) market is undergoing a significant transformation being pushed by the formidable competition posed by Chinese automakers.

Tesla CEO, Elon Musk, acknowledged the intense rivalry and potential opportunities in the rapidly evolving global EV market in his recent assessment made during a Tesla earnings call.

“Our observation is generally that the Chinese car companies are the most competitive car companies in the world,” Musk said. He went on to express the belief that without trade barriers, Chinese carmakers would “pretty much demolish” their foreign counterparts, underlining the exceptional capabilities of these companies in the EV sector.

This recognition comes as Chinese automaker, BYD, surpassed Tesla in the October-December period by selling a record 944,779 new energy vehicles, including 526,409 pure electric cars.

The rise of BYD, along with fellow Chinese manufacturers such as SAIC Motor Corp., is seen as a transformative moment in the electric vehicle (EV) market. China, directly challenging traditional automotive powerhouses like Japan, has become a leading player in the international export of passenger cars.

As of October this year, China has shipped approximately 1.3 million electric vehicles out of the total 3.6 million worldwide, signaling a significant shift in the dynamics of the global automotive industry.

Bridget McCarthy, Snow Bull Capital’s head of China operations, highlighted the industry’s evolution, stating, “It’s no longer about the size and legacy of auto companies; it’s about the speed at which they can innovate and iterate.”

However, despite the acknowledgment of Chinese automakers’ prowess, Musk clarified that Tesla does not currently see “an obvious opportunity to partner” with them, except for potential collaboration on sharing Tesla’s supercharging network.

“So they’re extremely good,” Musk said, but Tesla does not see “an obvious opportunity to partner” except on sharing its supercharging network.

“We are obviously happy to give any electric car company access to our supercharger network. We’re also happy to license full self driving, perhaps license other technologies, and anything that could be helpful in advancing the sustainable energy revolution,” Musk added.

This cautious approach is seen as a reflection of Tesla’s commitment to maintaining a competitive edge in the market.

While Chinese automakers gain momentum globally, Tesla faces challenges in its crucial Chinese market. Tesla drivers in China are encountering entry restrictions at government-affiliated venues due to data security concerns amid ongoing tensions between the United States and China. This raises questions about Tesla’s future in China, the world’s largest EV market.

In response to intensified competition and policy uncertainties, Tesla has taken measures to maintain its market position. The company lowered prices in China, following several price cuts over the past year.

These price reductions added pressure on Tesla’s profitability. The company reported a second consecutive quarterly profit drop on Wednesday, and said in its Q4 2023 results that its EV sales could grow notably slower in 2024 compared to last year.

Despite the rivalry with BYD, Tesla recognizes the strategic importance of its Chinese counterparts, particularly BYD, as a key battery supplier. Musk expressed gratitude for their suppliers, which include Panasonic, CATL, LG, and BYD.

“We are very appreciative of our suppliers. You know, Panasonic obviously is our longest supplier there. Amazing company. We’ve got CATL, we’ve got LG,” Musk said, adding, “and BYD.”

Looking ahead, Tesla plans to ramp up orders from these suppliers in 2024, reflecting the collaborative nature of the EV industry.

While BYD has experienced significant success in the Chinese market, its expansion beyond borders faces challenges. Europe is considering imposing higher tariffs on Chinese car imports, aiming to protect local manufacturing jobs. This, coupled with trade tensions reminiscent of the challenges faced by Tesla in the US, poses obstacles for BYD in accessing international markets.

If you have paid for the next edition of Tekedia Mini-MBA which begins on Feb 5,  you should have received your login instructions by now. I want to welcome you to our academic festival; thank you for choosing Tekedia Institute.

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One of the worst economic policies in Nigeria since 1999 is the current floating of the Naira. That decision has a score of “F” from me, because despite what any person could tell you, from the IMF to the Central Bank of Nigeria, economics is “science” played by the people. And science operates on principles. 

In the natural philosophy domains like engineering, those principles are self-evident: you cannot throw a beam during construction without supporting systems. In social science like economics, you cannot float a currency without FIRST ensuring that you can create parity on demand and supply. 

Yes, if demand continues to rise for US dollars in Nigeria and you have no means to improve the Supply of US dollars, you have disarmed the Naira, because market forces will weaken its positioning. This is economics 101; every WAEC Economics textbook always begins with Prof Lord Robbins definition of economics where he posited on the relationship between the “end and scarce means”.

Today, Naira is hitting above N1,400/$: “Naira on Thursday fell to a record low of N1,410 per dollar following strong demand on the parallel market, also known as the black market. This represents 3.29% or N45.00 weaker than N1,365 recorded at the close of trading on Wednesday.” Where is the N600/$ stable state?

Nigeria needs to remove the float. What we were doing was just fine if we can attack the corruption in the policy over discarding the whole system.  If Mr. Wazobia wants to import Equipment A from Germany,  let him source his USD funds. And if you want to assist, offer a rebate on the official and black market rates. By offering a rebate, over the old system, you would be sure the equipment would be imported. 

I call on the Nigerian government to focus on policies which will create more US dollars by deepening our industrialization policy. But to think that we can float Naira and it can stabilize over time by pure financial engineering is an illusion. AO Lawal would have graded any suggestion “P8”. Factories, warehouses, etc for physical, digital and services will strengthen Naira, and nothing more, and Nigeria needs to get into that.

Good People, Nigeria must FLOAT industries (yes, companies) to get Naira to fight globally! And here floating companies mean starting enterprises across industrial sectors and growing them to the point they become public companies because they have become super successful.

In the past, we credited people cheap US Dollars, and they could divert the funds to other things. If we change to a rebate system, we would remove that loophole as before payment, we would reconcile data from customs, banks and the company, making sure cheap US dollars were going to PRODUCTIVE things over expanding mindless consumerism.

People, get me right; I am not a political person. I have been consistent with this position for months. I hope I am wrong. But from basic economics, removing frictions to attain market transaction equilibrium faster does not mean price can radically improve if Demand and Supply positions remain misaligned. That is fundamental and cannot be disintermediated as if 90 people each wants to buy $100 with Naira, and you have only two people selling each $100 for Naira, whether you use mobile app, bank hall, bureau de change, etc,  the price of Naira will go up, because there is no parity between demand and supply here.

This is the summary:  if 90 people each wants to buy $100 with Naira, and you have only two people selling each $100 for Naira, whether you use mobile app, bank hall, bureau de change, etc, the price of Naira will go up, because there is no parity between demand and supply here. The impact is clear: lack of stability in the exchange rate makes making long-term investments impossible, pushing the nation into a trading and rent-seeking ground.

The government can ideally do this floating later once it gets a good picture on how to have access to USD dollars via any means possible that excludes borrowing! The unstable state of the Naira is more dangerous to the economy than mismatch on pricing between official and black market currency rates which ironically the Naira floating did not close, making the core reason for the floating largely unrealized.