TESLA Inc. CEO Elon Musk said Wednesday that Chinese automakers will “demolish” global rivals without trade barriers, underscoring the heat the U.S. electric vehicle (EV) market leader faces from the likes of BYD Co., which are racing to expand worldwide.

Musk’s comments come after Warren Buffett-backed BYD, with its cheaper models and a more varied lineup, overtook Tesla as the world’s top-selling EV company last quarter, despite Tesla’s deep price cuts through 2023.

Chinese car companies were the “most competitive” and “will have significant success outside of China, depending on what kind of tariffs or trade barriers are established,” Musk said on a post-earnings call with analysts Wednesday.

“If there are no trade barriers established, they will pretty much demolish most other car companies in the world,” he said. “They’re extremely good.”

Musk has reason to be concerned.

He sparked a price war last year to woo consumers hit with high borrowing costs, in turn squeezing Tesla’s margins and worrying investors. On Wednesday, Musk warned Tesla was reaching “the natural limit of cost down” with its existing lineup.

Tesla plans to start producing a cheaper, mass market compact crossover codenamed “Redwood” mid-2025 to compete with inexpensive rivals, Reuters reported Tuesday. Musk on Wednesday confirmed that Tesla expects to start production of its next-generation EV at its Texas factory in the second half of 2025.

But Chinese EV makers, adept at keeping costs in check with a stable supply chain, are moving fast. With rising competition and excess capacity in China, many are now working on rapidly expanding their foreign footprint. (SD-Agencies)