BEIJING, January 26  (TMTPOST)— Tesla’s CEO Elon Musk admitted Chinese automakers are most competitive for the U.S.  electric vehicle (EV) giant.

Source: Visual China

“We have a lot of respect for the car companies in China. They are the most competitive in the world ... they work the hardest and they work the smartest,” Musk said on an earnings call on Thursday. The head of Tesla then added: “And so, if I were to guess ... probably some company out of China is the most likely to be second to Tesla.”

While Musk didn’t specify which companies in China have the potential to be the most challenging one for Tesla, recent data showed BYD Co., the EV maker backed by Warren Buffett’s Berkshire Hathaway, is outpacing Tesla in sales.

Tesla delivered more than 1.31 million vehicles during 2022 with a yearly increase of 40%, which not only failed to meet its own target of 1.5 million but also was overtaken by BYD’s annual sales of 1.8635 million units. With sales topping 200,000 units for the fourth consecutive month, BYD met its annual target of 1.5 million vehicles for 2022 a month earlier, and the annual volume suggests it shipped at least 500,000 vehicles more than Tesla.

China has become Tesla’s key production base as well as overseas market. The China Passenger Car Association (CPCA) estimated Tesla Shanghai Gigafactory delivered more than 710,000 vehicles, accounting for more than 50% of Tesla’s total delivery in 2022. The financial report of Tesla on Wednesday said each of its vehicle factories set output record in the fourth quarter, though Shanghai factory is not expected to post meaningful sequential volume increases in the near term since the factory” has been successfully running near full capacity for several months”. 

Following the quarterly financial results, Musk that day expressed optimistic on outlook. He told analysts at the earnings call that orders in January are roughly double the production and recent price cuts, including the new round in the start of this month in China, triggered consumers’ interests. He also stressed Tesla’s team is “winning in China”, while believing is company can attract the best talent in the country. Back 2021, Musk has called Chinese auto manufacturer the “most competitive in the world” and said some of them are very good at software.