Tesla Inc (NASDAQ:TSLA) is shifting its focus away from traditional car manufacturing and doubling down on autonomous technology, as Chinese electric vehicle (EV) makers rapidly gain ground in both performance and pricing, according to a note from Morgan Stanley.
A new small SUV launched by a Chinese technology company has reignited debate about the competitive threat facing established automakers. The vehicle, described by analysts as resembling high-end luxury models but priced at entry-level EV rates, reflects the strides Chinese firms have made in combining design, technology, and affordability, the analysts noted.
“China may have already won the EV battle,” analysts wrote. “The real question now is: who will win the autonomy war?”
The firm highlighted that the SUV is only the second model ever produced by the Chinese tech group, yet it already outpaces many Western competitors in key areas. Ford’s leadership, for example, has publicly acknowledged the capabilities of the first vehicle launched by the same company, calling it a benchmark in the evolving market.
By 2027, Morgan Stanley estimates that the Chinese tech firm’s EV revenues could reach 233 billion yuan ($32 billion), matching Tesla’s auto revenue levels from 2020. This rapid growth, coupled with intensifying competition and overcapacity risks, has prompted Tesla to prioritize its ambitions in autonomous driving and technology services over traditional vehicle sales.
Analysts cautioned that investor expectations for Tesla’s near-term automotive performance may not fully account for the surge in new EV production from China, which is expected to impact global markets.
The report also suggested that Chinese EVs are likely to reach US shores despite existing trade barriers. While tariffs and regulatory concerns remain, Western automakers are increasingly exploring partnerships with Chinese tech companies to access advanced technologies and scale production domestically.
“The best product ultimately finds its way to the best consumer,” the note said. “The bigger question is whether Beijing will allow it.”