Tesla has made no strategic errors. Unlike domestic automakers, Tesla continues to focus on the Model Y and Model 3 with minor refreshes. Remarkably, their vehicle designs remain relevant even after a decade. Tesla channels its primary effort into autonomous driving and core EV technology — the “three electrics” (battery, motor, and electronic control system) — while Chinese manufacturers pour resources into releasing new models every year. Each new model costs upwards of a billion RMB to develop, yet sells fewer than 50,000 units annually. NIO, Xpeng, and others are prime examples.
In the short term, Tesla appears to be moving slowly on new models and seeing declining sales, which leads some to conclude that Chinese automakers’ aggressive development pace has eaten into Tesla’s market share. I think this is a mistaken reading of the situation. In reality, the entire market is contracting. Once EV penetration surpasses 40%, volume growth is bound to slow — that is simply the nature of an industry cycle. Tesla clearly understands this. If a major redesign doesn’t yield a major sales surge, why spend on it? Better to pour everything into autonomous driving and deliver another legendary vehicle in five or ten years.
Chinese automakers are in too much of a rush — because standing still means immediate bankruptcy. Don’t be fooled by the billions in cash sitting on their balance sheets. Once sales fall below 200,000 units annually, after stripping out operating costs and R&D, they are one to two years from shutting down. So they enter a vicious cycle: one model underperforms, they push out another, using large pre-order deposits to manufacture buzz and attract eyeballs — or at minimum, pull in some fresh investment capital. Last year, Xpeng claimed that pre-order numbers for its G6 were going to save the company. Look at their actual monthly deliveries now. Pre-order figures can be gamed — they cannot be trusted.
We are entering the era of intelligent driving. If you are not spending money where it truly matters, the consequences are entirely predictable. Tesla’s current strategy remains sound. Xiaomi’s road ahead does not look particularly bright either.