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.
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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.