In a recent earnings call, Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk said that Chinese automakers could "demolish" their global counterparts if not for existing trade barriers.

What Happened: Musk praised the competitiveness of Chinese car companies during a Tesla earnings call. He indicated that their success outside China would hinge on the establishment of tariff or trade barriers, reported Nikkei Asia.

"Our observation is generally that the Chinese car companies are the most competitive car companies in the world," Musk said. However, he noted that Tesla doesn't see an "obvious opportunity to partner" with these companies, except on sharing supercharging networks.

Despite this competition, Musk acknowledged BYD (OTC:BYDDF) (OTC:BYDDY) as an important battery supplier along with Panasonic (OTC:PCRFF) (OTC:PCRFY), CATL, and LG (OTC:LGEIY). He announced plans to increase orders from these suppliers in 2024.

Tesla's presence in China, the world's largest EV market, is also being challenged due to data security concerns, leading to restrictions for Tesla drivers at government-affiliated venues.

Tesla on Wednesday reported fourth-quarter revenue of $25.17 billion, which was up 3% year-over-year. The revenue missed a Street consensus estimate of $25.62 billion.

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Why It Matters: Musk's acknowledgment of the strength of Chinese automakers comes at a time when these companies are making significant strides in the global electric vehicle (EV) market.

Amid rising competition from Chinese automakers like BYD, Tesla has been reducing prices in China and Europe. During the October-December quarter, BYD achieved a milestone by selling a record-breaking 944,779 new energy vehicles, encompassing 526,409 pure electric cars, surpassing Tesla and securing its position as the largest electric vehicle maker for the first time.

Earlier this week, a senior executive at BYD issued a warning to Musk about potential hurdles in the field of intelligent driving systems. The executive, without specifically naming Tesla or Musk, seemed to be responding to a post by Musk on his X platform in early January.

BYD has also been making significant strides in the luxury EV market, a segment traditionally dominated by Tesla. The company has expanded its EV lineup to over 20 models, targeting both the international and high-end markets.

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