We’ve all heard of the Tesla, and many aspire to own one. It’s a luxury car, and we all know of it as the last word on electric vehicles. According to news from the Far East, however, Tesla just may be saying its last words. BYD, once dismissed by Elon Musk as an EV destined to die in homeland China, is making inroads into Tesla’s market share on the product. BYD sold more electric cars than Tesla in the last quarter of 2023, reaching its goal of putting China on the map in terms of automobile manufacturing. Most of the Western world may not even know about BYD, but what they might want to know about Tesla is that its position on the market just got that much more precarious with a product recall that saw 1.6 million vehicles being called back from the Chinese market.
The recall was the result of an announcement by China’s State Administration for Market Regulation. The recall plan was filed by Tesla’s operating arm in Beijing, promising to rectify the issues in the car through a remote software update. Providing additional automatic assisted steering control is one of these patches. Before the update, switching on the automatic assisted steering function can tempt drivers to misuse the combined driving assistance function, increasing the risk of road accidents. The statement that followed the update urges “drivers to perform their driving duties and comply with driving regulations when this function is enabled, to reduce the risk of collision caused by misuse of the assisted steering function.”
A driving function that increases the risk of road collisions is not the only reason why so many Teslas are being recalled in China. A further 7,538 Tesla Model S and X vehicles have been recalled for an issue with the vehicle’s door. The door unlock logic function meant that there was a risk of the door opening if the car was involved in an accident. The recalls will be carried out in stages, and Tesla owners will be spared the inconvenience of having to bring the cars into a shop, as the fix will be purely software-based. Under the Chinese market regulations, however, this still qualifies as a product recall. The issue in the door is said to be present in vehicles manufactured between October 26, 2022, and November 16, 2023. Last May, too, Tesla recalled close to 1,104,000 vehicles in China to address an issue that safety risk regulators alleged increased the chance of drivers accelerating mistakenly. Needless to say, the issue, which affected Tesla’s models S, X, 3, and 6, also increased the risk of collisions on the roads.
This is of course not the first time Tesla vehicles were recalled due to malfunctions. Just last month, a safety flagging by the US authorities resulted in a recall of nearly all two million of the vehicles currently on the country’s roads. The safety regulator found that the Autopilot system was prone to misuse in a way that increased the risk of road accidents. After an analysis of close to one thousand Tesla crashes, they found that drivers tended to use the Autopilot function on local streets rather than limited access highways, for example. Coupled with disregard for other safety directives such as paying attention to the road and always having the driver’s hands on the steering wheel, the Autopilot function was giving rise to more accidents on the roads than usual. The system update will fix a defect in the monitoring system in the car that monitors whether drivers are paying attention while the Autopilot feature is in use.
The frequent flagging of potentially unsafe features in the US is even drawing criticism from the policymaker level. Asking Tesla to recall all the components in the vehicle that they were aware was a risk to the public, Democratic Senators Edward Markey and Richard Blumenthal wrote a letter to the company stating that “Tesla’s knowledge of safety flaws in its vehicles and concealment of the causes of these flaws from the National Highway Traffic Safety Administration” was cause for extreme concern. This flagging of the assisted driving functions on the vehicle is a major blow to Tesla, given that it is one of its chief attractions on the market. The recall is expected to have a drop amounting to three-thirds of a percent in the US, which though not significant, adds to a long list of worries for the automobile maker. The recalls especially have the potential of impacting the company’s growth potential in the Asian market, which would be a significant loss based on population alone.
Tesla already operates a manufacturing plant capable of producing 22,000 vehicles per week in Shanghai. Tesla is also set to open something dubbed a ‘Megafactory’ in Shanghai, which will produce 10,000 Megapack battery units a year. This is equal to 40 gigawatt hours of energy storage, to be distributed worldwide. The factory is a reflection of Musk’s sentiments, expressed over four years ago, that in the long-term, “Tesla Energy will be roughly the same size as Tesla Automotive.” Tesla also cannot quit the Chinese market easily. Close to 22% of Tesla’s revenues come from the Chinese EV market, which also happens to be the world’s largest market for electronic vehicles. US regulators, for their part, are not happy about the Chinese public benefitting from US technology. More specifically, the current US administration is looking to prohibit investments that could potentially benefit China’s military capabilities.
Regulatory pressures have caused most companies to reduce their footing in China. Big Tech companies such as Microsoft, Apple, and Google for example have already shifted their footing in Asia to production facilities in India and Vietnam. Tesla however is not giving up on their relationship with the Chinese government – and some believe that any reports that Tesla is suffering in the East are skewed. According to these arguments, just because BYD is beating Tesla purely in terms of unit sales, does not mean that it is overtaking Tesla in terms of revenue or profits. BYD is selling more cars at a cheaper price point and with fewer frills, while Tesla sells premium vehicles for higher prices. Who the ultimate winner of this particular race remains to be seen.
(Theruni M. Liyanage)