China's Automakers Would 'Demolish' Manufacturers If Not For Trade Barriers: Musk

Welcome back to Critical Materials, your daily roundup of all things EVs and automotive tech. Today, we are—as you may have already guessed—talking Tesla. After all, it’s the morning after Tesla’s quarterly earnings call and the world is aflutter with the fallout.

CEO Elon Musk gave some insight into how the Chinese auto industry cascades across the globe, Tesla’s stock takes a hit, and the automaker denounces 4680 as the cause of the Cybertruck slowdown.

Let’s jump right into it:

30%: Elon Musk says that China’s auto industry would demolish other automakers if not for global trade barriers

The Chinese EV market is absolutely booming and it has been for some time. The industry has positioned itself well ahead of most other countries, and, as such, has found new opportunities to sell EVs outside of its borders where demand is quickly growing among new car buyers.

During Tesla’s quarterly earnings call on Wednesday, Musk acknowledged how quickly and efficiently China’s EV industry is moving, and that it would “demolish” other automakers if some barriers were not put in place at the trade level:

Well, our observation is generally that the Chinese car companies are the most competitive car companies in the world. I think they will have significant success outside of China depending on what kind of tariffs or trade barriers are established. Frankly, I think if there are not trade barriers established, they will pretty much demolish most other companies in the world. So, they’re extremely good.

Demolish! What a verb to use. 

China’s EV success story has led to some so-called “dumping problems” for the world, where markets across the globe are seeing an influx of Chinese cars hit the streets at a lower price than what can be produced domestically. This has led to some governments putting some protectionism-esque tariffs and regulations in place to avoid a flood of Chinese cars, and even a probe by the European Commission.

Tesla should know first-hand how the Chinese auto industry operates. After all, it became the very first foreign automaker on Chinese soil to not be required to have a joint partnership with an already established domestic player. But Tesla—and Musk—isn’t alone in recognizing this issue, either. Stellantis CEO Carlos Tavares claimed that the global auto industry has a “big fight” ahead of it, and the main antagonist is the Chinese auto industry.

“My number one competitor is the Chinese carmakers,” said Tavares. “This is going to be a big fight. There is no other way for a global carmaker like Stellantis that is operating all over the world than to go head-on with the Chinese carmakers. There is no other way.”

Last quarter, Tesla lost the crown for being the world’s largest seller of EVs to China-based BYD, which skyrocketed sales 62% year-over-year in Q4 2023, largely thanks to exports. Whether or not it will continue that trend is to be seen, but if that’s any indication of just how strong (and quickly) China’s market is moving across the globe, domestic car makers have a valid fear.

60%: Tesla stock tanks with news of 2024 production slow down

Tesla Stock 20240124

Tesla’s stock is a bloodbath following the release of the automaker’s earnings report on Wednesday. Both earnings and revenue failed to meet market expectations, leading to an 8.8% dump in trading price into after-hours trading.

But it wasn’t just the numbers that failed to appease investors. Tesla also became vocal about a projected slowdown of its annual growth rate through 2024, warning that it “may be notably lower.”

Tesla’s Chief Financial Officer, Vaibhav Taneja, explained thusly:

There will be periods where we won’t be growing at the same rate as before. We are between two major growth waves. The first one began with the global expansion of Model 3 and Y, and we believe the next one will be initiated with the next-generation platform. In 2024, our volume growth will be, you know, lower, as we have said, because we’re trying to focus the team on the launch of the next-generation vehicle.

As Taneja explained, Tesla plans to shift its teams to focus on Tesla’s next-generation vehicle. Coined “Redwood,” this next-generation platform is speculated to be a crossover built on an all-new platform and enter production as early as mid-2025. Perhaps a 48-volt architecture and 4680 cells?

All of this is speculation, of course. However, Musk has previously claimed that Tesla’s next-generation platform will be “head and shoulders above anything else that is present in the industry,” meaning that preparing for advanced production needs may take a significant internal effort.

You have to admit that it is a little coincidental that the leak of Tesla’s next-gen platform dropped on the same day that its lackluster earnings report came out. Could it have been to soften the blow of less-than-stellar market news? Maybe, but Tesla was fairly open about it working to ramp up the next-gen vehicle platform on its earnings call as well, so perhaps it truly was a leak.

Either way, Tesla’s stock has always been quite volatile, and small shifts in actual and projected earnings have the power to move mountains.

90%: Cybertruck production slowdown not due to 4680 cells, apparently

Tesla's 4680-type cylindrical battery cell

As we all know, 2024 is the year of the Tesla Cybertruck, and we’re all just kind of living in it. I’ve accepted it, and now it’s your turn—because more of them are on the way. Slowly.

Like most of Tesla’s new vehicles, the Cybertruck will run into an S-curve of production ramp-up. It’s just going a bit more slowly than originally anticipated. The long-standing rumor is that Tesla’s new 4680 battery cells were to blame for the speed bump, but according to Karn Budhiraj, Tesla’s VP of Supply Chain, that simply isn’t the case.

I just want to allay any concerns regarding 4680 limiting the Cybertruck ramp because I’ve seen some people commenting about that. To date, 4680 production is ahead of the ramp with actually weeks of finished cell inventory, and the goal is to keep it that way, not only for Cyber, but for our future vehicle programs.

Presently, Tesla operates one production and assembly line for 4680 cells. The automaker plans to expand to four more lines in the third quarter of 2024, which will likely be a necessity if it does kick its next-generation platform into play in mid-2025 as expected, and it carries over the 4680 cells from the Cybertruck.

That being said, if Tesla says that it has “weeks” of battery cell supply, the automaker still has other areas to work on for the production ramp. What those specific areas are, remain an unknown.

Tesla says that demand for the Cybertruck is “off the hook,” meaning that Tesla should be able to sell every single unit that it makes in the foreseeable future. However, current output figures point to less than 1,000 units produced every month, which is far less than the 5,000 units of the Model Y that the Texas Gigafactory can produce.

Musk warned that the Cybertruck, like all of Tesla’s previous vehicles, would take an effort to scale up production. The CEO specifically said that it could take up to 18 months to be cash flow positive, which isn’t indicative of production volume or speed, but does indicate that Tesla sees a signifcant uplift needed to scale production at volume. Musk says that he ultimately sees Tesla fulfilling about 250,000 Cybertruck orders per year, or a production output of nearly 700 trucks per day.

100%: Are you buying a new Tesla this year?

2024 Tesla Model 3 (Highland)

With Model 3 Highland dropping in the U.S. finally, a number of would-be and current Tesla owners are placing orders for the refreshed platform. Moreover, the launch of the Cybertruck is filling pent-up demand, and a Model 3 Performance refresh seems to be right around the corner as well.

Have you been waiting for Tesla to refresh its offerings before buying or upgrading? Or is there something else that catches your eye as a new car buyer in 2024? Let us know in the comments.