Billionaire Ken Griffin explains why it was ‘heartbreaking’ to see BYD leapfrog Tesla in the EV race: ‘We’ve got a real competitor in China’

“Watching BYD surpass Tesla in global sales was a bit of a heartbreaking moment,” he told CNBC at the MFA Network conference in Miami on Tuesday, adding that “we’ve got a real competitor in China.”

Earlier this month, BYD, which has been aggressively expanding its operations internationally, revealed it sold a record 525,409 electric vehicles (EVs) in the fourth quarter of last year. Meanwhile, Tesla delivered just 484,507 EVs over the same period. 

Griffin noted that China has used its size and relatively low labor costs to dominate many key industries in recent years, including solar panels, EVs, and consumer electronics, making them a serious economic competitor to the U.S. “We often lose sight of the fact that the Chinese economy represents 1.4 billion people. So they have a huge advantage when it comes to simple economies of scale, combined with a strong education system that produces four times as many STEM graduates,” he said.

Griffin went on to argue that some of the West’s green energy policies might also end up benefiting Chinese EV makers, unless trade barriers are put in place. 

“California wants no internal combustion cars in the foreseeable future. Are we going to make that happen by buying Chinese vehicles? Because that’s the most cost-effective way to do so for American consumers,” he said, arguing that would be a “really hard pill to swallow.”

The comments come after Tesla CEO Elon Musk called Chinese car companies the “most competitive” globally on the company’s fourth quarter earnings call earlier this month. “If there are no trade barriers established, they will pretty much demolish most other car companies in the world,” he argued. “They’re extremely good.”

General Motors CEO Mary Barra also addressed Musk’s comments in her company’s fourth quarter earnings call this week, saying that “we do need a level playing field” and remarking on the importance of “the right cost base” without elaborating on potential trade barriers. “Give us a level playing field, and I’ll put our products up against any,” she said.

Chinese EVs are already subject to a 25% import tariff in the U.S., but the Biden administration has reportedly been considering raising it to help American manufacturers remain competitive. 

“We are taking a strategic, thoughtful, deliberative approach to our bilateral economic and trade relationship with China, and that certainly applies to our review of these tariffs,” White House Press Secretary Karine Jean-Pierre said in December, per Bloomberg.

Maintaining a friendly rivalry, avoiding a counterproductive clash

While Citadel’s Griffin is worried that key U.S. industries are being challenged by Chinese competitors, he was also clear that maintaining a constructive relationship with China is critical moving forward. “The big issue is the geopolitical tension between the world’s two most important economies. And I really do hope that we continue to maintain some sense of the détente that has been playing out over the past few months,” he said.

Griffin noted that some studies show that the U.S. economy would experience an 8% to 10% GDP hit if we lost access to Taiwanese semiconductors in the event of a conflict with China.

“If there were a rupture around Taiwan, it would be catastrophic to both the Chinese and the American economies. And by catastrophic, I think you’re looking at Great Depression circumstances,” he added.

The global economy suffered through a chip shortage between 2020 and 2023 that affected 169 industries and prompted the Biden administration to enact the $280 billion CHIPS and Science Act to bolster U.S. supply. Although many critical chips are now back in stock, the rise of AI has led to a new vulnerability in the industry. And Taiwan is at the center of this industry, with the Taiwanese semiconductor giant TSMC dominating the high-end AI chip market, although it’s been struggling to meet demand, even as it builds out new factories.

For Griffin, that means U.S.-China relations are as important as ever. He argued the two nations need to ensure they always maintain a “constructive tone” in discussions, even when they disagree. “It’s really important as a matter of national economic security that we’re able to maintain the peace in that region of the world,” he said.