Elon Musk says his biggest Tesla competition will be a Chinese automaker: ‘They work smarter’

Elon Musk has temporarily lost his “Mister Twittercapped for Tesla’s earnings call on Wednesday to identify its electric car giant’s biggest challenger: competition from China.

With Tesla coming off its worst year in the markets, Musk, who has been the company’s CEO since 2008, had some tough questions to answer during the investor call regarding the company’s performance during the fourth quarter of this year. 2022. The company’s shares fell 50% last year after soaring in 2020 and 2021, nestling at a two-year low in November of last year.

Investors in the electric vehicle company have worried that Musk spread too much after acquiring Twitter last year, while his court appearance this week for allegedly misleading Tesla investors in 2018 with his “funding” tweet guaranteed” certainly didn’t help matters.

So Tesla investors were likely relieved when the company posted record revenue on Wednesday. Musk said on the call that the company saw “stronger year-to-date orders than ever before in our history” in the first few weeks of January, suggesting a series of price cuts around the world helped boost demand.

But when pressed on the state of the EV industry in China, where Tesla has lost ground over the past year, Musk admitted Chinese companies are the most likely to challenge Tesla’s dominance.

“We have a lot of respect for the automakers in China. In our experience, they are the most competitive in the world, and the Chinese market is the most competitive,” Musk said. “They work harder and work smarter, and we have a lot of respect for the Chinese companies we compete against.”

“If I had to guess, it would probably be a company outside of China as most likely second to Tesla,” he added.

The growing electric vehicle industry in China

EVs are big business in China, with the market accounting for two-thirds of EV demand last year, and Tesla, which began making cars at its Shanghai Gigafactory in 2019, is far from the It’s the only game in town.

The demand for electric vehicles in China is huge; A record 6 million electric cars were sold in China last year, accounting for more than a quarter of new vehicle sales, and Chinese electric car companies are ramping up to meet demand. Chinese automaker BYD, backed by Warren Buffett, overtook Tesla in electric car sales in China last year.

As of 2021, some 300 electric vehicle companies were operating in China, benefiting from more than a decade of investment and generous subsidies from the Chinese government to grow the industry, which now includes some 4 million charging stations spread across the provinces of the country, one of which has three times as many charging units as the entire United States

EV subsidies were initially targeted for electric cars to achieve price parity with combustion engine vehicles, and the sector has matured and diversified in the decade since they were first implemented. The box-sized Mini EV developed by the Chinese company Wuling cost just over $5,000 last year and ranked as the best-selling electric car in China in 2021.

Consumer subsidies were reduced in 2021 and abolished on January 1 this year, but some tax holidays remain in place, while industry analysts have predicted that the sector will become more market-oriented in the coming years than to policies.

A threat to Tesla

Musk has praised Chinese automakers in the past, calling them the “most competitive in the world” in 2021, adding that Chinese automakers boasted advanced software projects that could “shape the future of the auto industry.”

But they also pose a huge threat to Tesla’s waning power as demand for its vehicles dwindles in China, which currently accounts for 40% of the company’s sales. BYD, Tesla’s main competitor in China, and other Chinese manufacturers saw huge sales growth towards the end of last year, while Tesla’s numbers tumbled more than 40% in December.

Tesla has lowered car prices in China twice in recent months after the Chinese government removed its EV subsidies to prop up sales amid slowing demand. The company has since cut prices in the US and other markets as well.

Musk hinted on the earnings call that the price cuts appeared to have worked, given Tesla’s record profits in the recent quarter, and added that the outlook for demand in the year ahead was optimistic, despite “likely a contraction of the automotive market as a whole”.

An analysis by BloombergNEF has predicted that Tesla’s sales will grow 40% in 2023, while its much-demanded Model Y car could become the world’s best-selling electric vehicle and even enter the top three cars of any type globally. But as Tesla continues to perform in some places, increased competition from Chinese automakers could further push that all-important market out of reach.

This story was originally published on Fortune.com

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