In 2011, Elon Musk ridiculed the quality of electric vehicles made by China’s BYD. Then he admitted this May that “their cars are highly competitive these days.” Now, the Tesla CEO is amping up his praise of Chinese EV makers.
“The Chinese car companies are extremely competitive," Musk said at this week’s New York Times Dealbook conference. "China is super good at manufacturing, and the work ethic is incredible.”
He even went so far as to suggest that the top 10 automakers of the future might be mostly Chinese ones—although he still envisions Tesla sitting atop them all.
“There's a lot of people out there who think that the top 10 car companies are going to be Tesla followed by nine Chinese car companies,” he said at the conference. “I think they might not be wrong.”
In the case of BYD, its manufacturing prowess had long impressed Berkshire Hathaway vice chairman Charlie Munger, who passed away this week. While Berkshire generally steers clear of the auto industry—it declined to invest in Tesla—Munger led an enormously successful investment in BYD. He called the carmaker’s founder and CEO Wang Chuanfu a “natural engineer,” adding that “the guy at BYD is better at actually making things than Elon is.”
'Demolish the old legends'
BYD came within a few thousand vehicles of surpassing Tesla in global EV sales in the third quarter (it already sells more when factoring in other categories including hybrids). It’s widely expected to take the lead this quarter or in the near future, even though it hasn’t entered the U.S. market amid a global expansion.
But Wang himself thinks many Chinese automakers—others include Nio, Xpeng, and Li Auto—have a bright future. “I believe the time has come for Chinese brands,” he said earlier this year. He called upon other Chinese automakers to go global and “demolish the old legends” of the industry.
Not everyone agrees with Musk on the auto industry's future, of course. Toyota, for instance, doubled down on hybrids even as Musk called them a “phase,” and this year they’ve proven to be a “smoking-hot market,” as one executive put it.
But it isn’t just Musk warily eyeing China’s formidable EV makers. Ford Motor executive chairman Bill Ford Jr. warned earlier this year that U.S. automakers are “not quite ready yet” to compete with them on electric vehicles.
“They developed very quickly, and they’ve developed them in large scale, and now they are exporting,” Ford said.
China atop Tesla's EV 'leagues'
Meanwhile China itself remains the world’s largest EV market, with 59% of global sales last year, according to the World Economic Forum.
Ford CEO Jim Farley added at a finance event in May, while discussing the EV future: “We see the Chinese as the main competitor, not GM or Toyota. The Chinese are going to be the powerhouse.”
One key advantage for China is its dominance in the EV supply chain. BYD, for instance, can keep its vehicle prices low in part because it owns the supply chain of its EV batteries, from the raw materials to the finished battery packs. It also designs its own semiconductors.
BYD launched an EV called the Seagull with a cutthroat price of about $11,000 earlier this year. It’s quickly become one of the best-selling EVs in China. The Seagull and similar vehicles from China could prove to be a disruptive force in overseas markets.
“If we consider different leagues of competitiveness at Tesla,” Musk said, “we consider the Chinese league to be the most competitive.”
