Tesla (NASDAQ:TSLA)'s CEO Elon Musk issued a warning on Wednesday, suggesting that Chinese automakers would “destroy” global competitors if trade barriers are eliminated.
Musk’s assertion underscores the mounting pressure faced by Tesla, the leading player in the U.S. electric vehicle market, from formidable competitors like BYD, a company backed by Warren Buffett, which clinched the title of the world's top-selling EV company last quarter.
Despite Tesla's aggressive price cuts extending through 2023, BYD managed to overtake the electric vehicle giant with its more economical models and a diverse product lineup.
Musk, in a post-earnings call with analysts, acknowledged Chinese car companies as the "most competitive" in the industry, adding that they "will have significant success outside of China, depending on what kind of tariffs or trade barriers are established."
"If there are no trade barriers established, they will pretty much demolish most other car companies in the world," he said. "They're extremely good."
The CEO initiated a price war last year aimed at attracting consumers hit with high borrowing costs, leading to a squeeze on Tesla's margins and raising concerns with investors.
Musk, addressing these challenges on Wednesday, cautioned that Tesla was approaching "the natural limit of cost down" with its current product lineup.
In an effort to address affordability concerns and maintain competitiveness, Tesla has unveiled plans to introduce a more affordable, mass-market compact crossover. Codenamed "Redwood," this new vehicle is set to enter production in mid-2025, positioning itself as a contender against lower-priced rivals in the market.
Musk on Wednesday confirmed that Tesla expects to start production of its next-generation EV at its Texas factory in the second half of 2025.
Shares of TSLA are down 8.76% in pre-market trading Thursday morning.