How Elon Musk might win over his EV competitors

Over the last couple of years Elon Musk, the billionaire owner of X (Twitter), Tesla and Space X, has mocked disabled employees, amplified racist conspiracy theories, and strangely even bent the truth about being good at video games.

His unique cocktail of unchecked commentary and infinite economic power is not only unsavoury, it’s dangerous. But this week I’m interested in Tesla, the primary driver of his immense wealth, and whether or not the game-changing electric car company is still driving the global electricity transition.

As a company, Tesla undoubtedly makes a great car. The company sold 1.78 million electric cars last year, and the Model Y remains one of the most popular new cars sold in Europe. It’s also the sixth most popular car in the US, full stop. The Model Y is cheaper than it ever has been, as Tesla has dropped its production costs by over 10 per cent in the last two years.

A big chunk of those cost cuts are due to its Chinese operations, where half of its global shipments originate from Shanghai. However, Tesla’s quarterly earnings report also revealed that sales revenue is down, its operating margin is getting tight, and its market share of new car sales in both the US and Europe is falling.

In contrast, Tesla’s biggest competitor is booming. The Chinese electric car company BYD sold 4.27 million electric vehicles last year (including hybrids), increasing its annual sales by over 40 per cent.

Most of BYD’s sales growth was in China, which remains the biggest electric car market by a country mile. Close to 60 per cent of the world’s electric cars are in China, and while Tesla’s market share in the country is slowly growing, BYD is simply dominating. Of the more than 10 million electric vehicles sold in China last year, over three in 10 were made by BYD. Tesla’s share was closer to three in 50.

Europe is the next biggest global market, where despite declines in the rate of new vehicle registrations, the number of cars per person continues to grow – in every European country except for Denmark, Greece, Finland and Norway. Part of this growth is being driven by electric vehicles. Throughout 2023, one in five new cars sold in Europe were electric or hybrids, and Europe now makes up around 20 per cent of new electric car sales.

However, most of the nearly 250 million cars on European roads are over 12 years old. While this should mean there will be lots of European households actively making decisions about their future vehicles soon, it will take years to cut into the existing market share. If we include battery electric and plug-in hybrids, electric cars still made up only 3.9 per cent of the total EU car fleet in 2023, and there are only four countries in the block that have crossed the 4 per cent threshold.

This is where Europe’s electric vehicle tariffs raise important questions. Over the last three years, Chinese EV exports to Europe were on a tear, growing tenfold. The market share of Chinese EV sales within the EU had grown from 1.9 per cent in 2020, to 14.1 per cent last year. If you include all the EVs made in China, including brands like Tesla and BMW, they represent more than one in four electric cars sold in the EU last year.

That was before new tariffs were introduced in July and implemented in October. Since then, we’ve already seen a 3.5 per cent drop in new Chinese EV registrations and projections that this will see far fewer electric vehicles on Europe’s roads this decade.

A similar impact has been seen in the US. Thanks to generous tax credits, the US electric car market doubled between 2021 and 2023, and electric vehicles now make up close to one-fifth of all light-duty vehicle sales. Due to significant tariffs effectively blocking competition from Chinese cars, Tesla’s Model Y and Model 3 made up over 40 per cent of all electric vehicle sales which raises the question of how much faster electric vehicles could have grown with more open competition.

Early in Biden’s term, Musk opposed tax credits that supported greater EV competition among US manufacturers. Since then, Tesla’s share of electric vehicle sales in the US since dropped from close to 75 per cent at the beginning of 2022, to 44 per cent in 2024.

Then, last January, he called on President Biden to increase tariffs on Chinese electric vehicles from 25 per cent to 100 per cent. At the time, Musk complained that Chinese electric cars would “demolish most other car companies in the world”. Ironically, he’s now worried about Trump’s tariffs on Chinese graphite, critical for making electric batteries. Tesla is teaming up with BMW to oppose only the elements of the EU tariffs that would affect their businesses, as the regulations include light tariffs on their vehicles that are manufactured in China.

Across all of these regulatory measures, there is clear nationalist self-interest at play. European and American regulators are afraid that cost will trump nationalistic pride when buying their next electric car. But these nationalistic impositions have often been reinforced by Musk’s global megaphone, all in the name of his share-price protectionism.

After Tesla as a company has done so much to put electric cars on the map, it is these inclinations that have undoubtedly slowed down the transition to electric cars – leaving consumers with fewer low-cost choices.

With Musk’s geopolitical influence growing by the day, we may, unfortunately, expect to see him continue to put personal profits ahead of global transition.