As with SpaceX, Tesla’s competition is revving up. Indeed, the firm’s lead in the EV market was narrowing even before Musk began his bureaucracy-bashing. General Motors sold 50 per cent more EVs last year than in 2023, and is now vying with Hyundai, a South Korean carmaker, to become America’s second-biggest provider of battery-powered vehicles. Although Tesla is still the market leader, RBC Capital Markets, an investment bank and Tesla bull, forecasts that the carmaker’s share of North American EV sales will drop to 53 per cent this year, from 68 per cent two years ago. Profit margins have narrowed as the firm reduces prices to undercut rivals. A recall of nearly every Cybertruck in America owing to problems with the glue used to affix exterior panels will not help.
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In China, the world’s biggest car market, the future looks bleaker still. BYD, Tesla’s largest rival, has 15 per cent of the market, more than triple that of the American carmaker. In February Tesla’s sales in China plunged by 49 per cent, year-on-year, whereas BYD’s rose by 161 per cent. Tesla’s sluggishness may have in part reflected the fact that Chinese customers were waiting for an upgraded Model Y available from February. But BYD has since gazumped it. On March 18, the Chinese firm unveiled a charging system that it said could power an EV in five minutes – half the time of Tesla’s charging infrastructure. Some pundits described it as the car industry’s “DeepSeek moment”.
BYD has also cast doubt on another part of the Tesla bull case: driverless technology. Tesla’s driver-assistance system, which it exaggeratedly calls full self-driving (FSD), is what others call level 2 autonomy, meaning that drivers must still keep their hands on the wheel and pay attention. Tesla bulls see advancing to levels 4 and 5, meaning fully autonomous driving, as the next stage in the firm’s quest to revolutionise transport. Tom Narayan of RBC Capital Markets ascribes almost three-quarters of his projected valuation of Tesla to hopes that it will develop fleets of low-cost robotaxis (without pedals and steering wheels), which would upend the economics of ride-hailing.
Yet late last month BYD stunned the car industry by launching an advanced driver-assistance technology, called “God’s Eye”, at no extra cost. It almost exactly coincided with Tesla’s release of a pared-down Chinese version of FSD that costs about $US9000 extra per car (roughly the same as BYD’s cheapest vehicle). BYD’s scorched-earth pricing strategy, alongside advances in the technology by legacy carmakers, has led some Wall Street analysts to cut their long-term Tesla forecasts. “In China, Tesla is no longer dictating the pace. The pace is being dictated to them,” says Tu Le of Sino Auto Insights, a consultancy.
Musk has still cards in his hand. SpaceX’s enormous Starship rocket, still in testing, could again transform the satellite business by delivering far bigger constellations than the Falcon 9, the company’s current workhorse. Tesla is hoping for a breakthrough in humanoid robots in conjunction with xAI, Musk’s artificial-intelligence company, which itself has become a valuable part of his empire. It is said to be raising $US10 billion at a $US75 billion valuation. Even X, formerly Twitter, appears to have recovered much of the value Musk torched when he bought it in 2022, perhaps thanks to its stake in xAI. The social media site has reportedly just raised money at an enterprise value of roughly $US44 billion – the price Musk paid for it.
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On March 20, Musk held an impromptu town hall to galvanise Tesla’s staff. He declared that robotaxis would soon be rolling off the company’s production lines, with each assembled in “less than five seconds”, and that 50,000 humanoid robots would be manufactured next year. Belief that Musk can achieve such lofty goals is what has propelled his companies’ values to stratospheric heights. He may feel that his success thus far gives him the right to a temporary sojourn in government, especially if he can strip away some of the regulations that constrain his ambitions. But his competitors will not waste the opportunity.
The Economist
