'Hardest & smartest workers': Musk sees Tesla's biggest competition coming from China

Tesla CEO Elon Musk believes that the toughest competition for Tesla will come from China, and it is "most likely to be second" in electric vehicles. China, Tesla's second-largest market, accounted for about two-thirds of all electric vehicles sales globally in 2022. Tesla's biggest plant is also located in China.

China has embraced EVs, with several rival companies competing with each other on style and pricing. These include Xpeng, Nio and BYD Co Ltd.

Musk was speaking while releasing financial results on Wednesday. Tesla said recent deep price cuts have led to an increase in demand. He informed that cost cuts are being done with a view to growing through what Musk expects will be a recession this year.

When asked about Tesla's competition, Musk pointed to the car companies in China, calling it the most competitive market in the world. However, he did not identify any Chinese automakers by name.

"They work the hardest and they work the smartest," he said. "And so we guess, there is probably some company out of China as the most likely to be second to Tesla."

"Our team is winning in China. And think we actually are able to attract the best talent in China. So hopefully that continues."

Tesla has cut prices in response to growing competition and slowing demand in China. Meanwhile, demand in the United States and other markets has also come down.

This is not the first time that Musk has praised Chinese workers.

In 2021, he had called Chinese automakers the "most competitive in the world". He also said Chinese workers had been "burning the 3 am oil" to keep Tesla's factories running during COVID lockdowns last year.

On revenues, the company slightly beat Wall Street targets for fourth-quarter revenue and profit despite a sharp decline in vehicle profits margins.

Tesla is now being seen as the initiator of a price war, but its forecast of a 37 per cent rise in car volume for the year, to 1.8 million vehicles, was down from 2022's pace.

Musk is expecting a "pretty difficult recession this year," but demand for Tesla vehicles "will be good despite probably a contraction in the automotive market as a whole."

Shares rose 5.3 per cent in extended trading.