Tesla CEO Elon Musk has revealed that he expects lower sales growth numbers for the electric vehicle company this year than last year. Musk said that Tesla’s growth would be “notably lower” this year than in 2023 when the company’s EV deliveries surged by 38%.
According to Musk, Chinese electric vehicle firms will “pretty much demolish” most competition on the international market unless nations put trade barriers in place to prevent them from pricing out Western automakers. EV companies from China have already flooded the European Union market with cheap and affordable electric vehicles, thanks to massive subsidies from Beijing. That move prompted EU officials to initiate a probe into EV subsidies from the Chinese government.
Tesla faced significant competition in the Chinese market from local automakers in 2023 and was ultimately surpassed in sales by BYD in the last quarter of the year. Tesla responded to increased competition in the Chinese market by slashing prices several times to help sustain demand for Tesla vehicles. While this allowed the company to deliver a record 1.8 million vehicles last year, its revenue grew at only about one half the rate and the wider market reeled from Tesla’s price cuts. Electric vehicle prices fell across the board, thanks to Tesla’s repeated price cuts. Used EV prices fell even further as the value of brand new electric vehicles dropped.
In the most recent quarterly update, Tesla noted that it wasn’t expecting another large wave of expansion in the near future until it launched a new electric vehicle model. Tesla said it is “currently between two major growth waves.” The first wave was the worldwide expansion of its Model Y/3 platform, and Tesla believes the next phase will feature the global expansion of its next-gen electric vehicle platform.
However, Tesla will have to contend with increased competition from Chinese companies on the global stage, especially in the affordable EV category. Elon Musk has talked about producing a $25,000 electric vehicle to tap into the general driver market. It is believed that Tesla’s new upcoming electric vehicle could finally be the long-promised affordable auto.
With Chinese companies slowly taking over their local market and expanding to the EU, Musk is calling for trade barriers to prevent the proliferation of affordable Chinese EVs, especially after BYD passed Tesla to become the best-selling EV maker in Q4 2023.
The Texas-based company’s shares fell by nearly 6% following Musk’s announcement of reduced growth this year.
The comment that Chinese companies could wipe out the international competition if protectionist policies aren’t instituted is a stark reminder to other Western EV makers such as Workhorse Group Inc. (NASDAQ: WKHS) that they need to be innovative in order to survive the brutal competition in the industry.
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