Chinese EV makers will destroy local players, countries need trade barriers to stay safe, warns Elon Musk

Elon Musk, CEO of Tesla, has expressed concerns over the competitiveness of Chinese automakers, stating that they could “demolish” global rivals if there were no trade barriers. Musk’s comments follow BYD backed by Warren Buffett, surpassing Tesla as the world’s top-selling EV company last quarter.

Despite Tesla’s price cuts in 2023, BYD’s cheaper models and diverse lineup propelled it to the forefront of the market.

During a post-earnings call with analysts, Musk acknowledged Chinese car companies as the “most competitive” and predicted their significant success outside of China, depending on trade barriers. He warned that without such barriers, Chinese automakers could outperform most other global car companies.

Tesla, facing increasing competition, plans to introduce a cheaper, mass-market compact crossover named “Redwood” in mid-2025 to contend with affordable rivals.

Musk confirmed on Wednesday that Tesla expects to start production of its next-generation EV at its Texas factory in the second half of 2025.

Chinese EV manufacturers, adept at controlling costs and maintaining a stable supply chain, are rapidly expanding their global presence. Despite the competition, Chinese brands have low brand awareness and face challenges regarding reliability, durability, and safety in the United States.

Spencer Imel, a partner at consumer insights firm Lansgton, noted that Chinese car companies need to improve these aspects to gain market share in the US

Musk’s remarks coincide with the US presidential election, where President Joe Biden has expressed concerns about China’s dominance in the EV market.

Former President Donald Trump has advocated for stronger tariffs, and Musk mentioned that there is “no obvious opportunity” to partner with Chinese rivals, although Tesla is open to providing access to its charging network and licensing technologies such as self-driving.

In Europe, a protectionist stance has been adopted towards Chinese EV makers, with investigations into potential punitive tariffs to shield EU producers from cheaper Chinese imports benefiting from state subsidies.

Ross Gregory, a partner at New Electric Partners, emphasized the need for policies beyond tariffs, urging the US and Europe to facilitate the development of diversified supply chains for their automakers.