Tesla maker Elon Musk has been critical of China’s rising authority in the EV market. He has called for global trade barriers in the EV market otherwise Chinese player BYD will demolish the local players. Musk’s comments are in response to “unimaginable” performance by Warren Buffett’s backed Chinese automaker BYD. BYD has surpassed Tesla as the world’s top-selling EV company in the last quarter.
Tesla has been marred by slowing sales in the United States even after a price cut in 2023, while BYD’s cheaper EVs has propelled the Chinese automaker at the top spot.
Musk while addressing a group of analysts accepted the competitive nature of Chinese carmaker BYD and predicted its success outside China, unless there are suitable trade barriers in place. He feels without any trade barriers in place BYD can force local players in other countries out of business within a short span of time.
Musk is battling his own horrors at home in the United States. Tesla has had a staggering performance in 2023, where its shares had doubled, but now is facing a downward spiral in the start of 2024. As per a report by the South China Morning Post, Tesla witnessed a horrendous performance with a sizeable loss of over $94 billion in market valuation within the first few days of the year 2024.
This decline in performance is attributed to several negative developments, including a reversal on EVs by car rental giant Hertz Global Holdings, continuous price reductions for its China-made cars, and indications of escalating labour costs. Furthermore, a number of Tesla cars are staying unsold in the United States due to flickering EV demand. Moreover, there are certain geopolitical concerns in Red sea leading to the redirection of shipments intended for Tesla’s Berlin plant; hence, triggering suspension of most production at its German facility.
At a personal level, Elon Musk has seen a huge decline in his own net worth as well. The Bloomberg’s Billionaire index has noted Musk’s depleting wealth as he lost over $23 billion due to Tesla’s poor performance.
Chinese car manufacturer, BYD, has been strategizing hard on pocket-friendly EVs, elongating its supply channel, and becoming global force in the EV market. The average price of a Tesla car is almost double the price of BYD car. BYD is targeting the mid-size EV car segment and has successfully entered the EV market in Asia, throughout South America, and Mexico and Tesla needs to do something to ramp up its revenues.
Experts believe although BYD has taken the number one spot from Tesla but it still lacks reliability, durability, and safety, giving Tesla an edge in the United States.
Spencer Imel, a partner at consumer insights firm Lansgton, highlights that the Chinese carmakers need to improve on their quality in order to propel its market sustainability in the United States.
Musk is aware the his remarks on Chinese carmakers coincide with the US presidential election, and the President Joe Biden has already shown his concrern over China’s unhealthy rise in the EV market. Former President Donald Trump too had advocated for stronger tariffs in Chinese manufacturers operating in the US, and Musk, on similar lines, has mentioned that even though they will refrain from partnering with Chinese rivals, but are open to giving access to its charging network and licensing technologies such as self-driving.
The global EV market has risen to the occasion as many other countries would like to safeguard their own interests against Chinese EV manufacturer BYD. In Europe, government is mulling punitive tariffs to shield EU producers from cheaper Chinese imports benefiting from state subsidies.
The EV space is getting intense with competition growing leaps and bounds and there is an urgent need of better policies that goes beyond tariffs. The US and Europe should provide level playing field for the local EV makers to perform better and diversify their supply chains..
Tesla is wary of stiff competition and is going to develop a much cheaper, market-reliant version of EV named “Redwood” in mid-2025. Musk has confirmed that Tesla is pulling up its preparations to start developing its next-generation EV at the home front in the Texas factory by the second half of 2025. Musk has also hinted at a Tesla car manufacturing plant in India that is part of his strategy to add to its existing network and build better EVs.