China, Xi Jinping Plan to Crush Elon Musk, Tesla, and the US EV Industry

When Tesla CEO Elon Musk was asked in 2011 about the Chinese electric-car maker BYD — a Warren Buffett-backed company focused on cheaper eclectic vehicles with a name short for Build Your Dreams — he simply laughed it off. “Have you seen their car?” he said with a giggle to Bloomberg TV, adding that BYD didn’t “have a great product” and “the technology is not very strong.”

Musk’s juvenile expression of hubris was (and still is) singular, but his belief that China’s automakers were not a threat was shared across the US auto industry at the time.

A lot can change in 13 years. BYD eclipsed Tesla in 2023 as the best-selling EV maker in the world. One out of every three electric cars sold is made by the company, up from 15% in 2020.

Instead of laughing off the competition, Musk is now sounding the alarm on threats from Chinese automakers. On a conference call with investors in January, he said Chinese EVs would “pretty much demolish” other American carmakers if allowed to enter the US. America’s biggest car companies have also started to recognize that they must figure out how to make electric cars cheap as soon as possible before China eats their lunch.

While the likes of Tesla, GM, and Ford are rolling out a handful of high-priced luxury EV models, Chinese companies already offer a slew of options across a range of price points: starter EVs, beater EVs, ones for getting from point A to point B. And while the American automakers are still trying to win over consumers just in their own country, Beijing is already planning to work around trade barriers and get these cars sold around the world, including in the US.

“The thought that Chinese-quality engineering and design are not as high quality as the legacy carmakers — that should be put to bed,” Tu Le, the founder of Sino Auto Insights, a consultancy focusing on the Chinese EV market, told me. “Right now, the legacies don’t have competitive products. There’s a vacuum. If China EV Inc. were allowed to enter the US today or next year, the legacies would be gutted.”

We are witnessing a shock to the global automotive order unseen since Japan barreled into the market in the 1970s. China’s EV ascendance has sparked a fight that is forcing companies to stretch the limits of their technological capability and policymakers to reimagine the ideological underpinnings of decades of trade strategy. What’s at stake is nothing less than a US industry worth $104 billion, about as much as Angola‘s national GDP, and all the 3 million jobs that come with it.

“It’s a global game. It has been a global game,” Le said. “Motherfuckers just haven’t been paying attention.”

It’s safe to say EVs have moved beyond the “early adopter” phase of the technological life cycle and are now working to conquer mainstream car buyers in the US. In 2023, 1 million were sold in the country for the first time, up from 918,500 in 2022. Despite this growth, there have been flashing red signs that American automakers’ strategy — making EVs that are just like combustion-engine cars but about $10,000 more expensive — isn’t working. Projections for sales growth in the years ahead have come down, and consumers have expressed dissatisfaction with the crop of cars available. To overcome that, carmakers have realized they must lure customers with cheaper models. Earlier this month, Ford CEO Jim Farley said his company was “ruthlessly” focused on developing a more affordable mass-market car. Tesla has been saying a cheaper car is on the way for years, without success (yet).

While US carmakers are still figuring out how to please a wide variety of customers, Chinese brands have EVs in about every form imaginable. Want a $10,000 car? Try the BYD Seagull. Want a luxury SUV that can float in water? That’s the BYD U8 Premium Edition. Want something more luxurious? Chery, another Chinese carmaker, launched a sexy EV sports car with scissor doors called the iCar, which costs between $21,800 and $58,000. China’s ability to expand its suite of offerings comes down to cost. Of course, the US has higher labor costs, but China has also taken great pains to own the EV supply chain. Legacy carmakers are still searching around the world to source the raw materials and parts they need, a project the Chinese government has been working on for over a decade. In fact, many of these companies are selling their products to American firms: Tesla buys batteries from BYD, for example.

The thought that Chinese-quality engineering and design are not as high quality as the legacy carmakers — that should be put to bed.

That doesn’t mean Chinese car companies aren’t facing challenges. While the US’s strategy (or lack thereof) has left us without enough chargers or the right kind of inventory, China has the opposite problem. It has too many…