Elon Musk believes the toughest competition for Tesla comes from China, and expects a carmaker from the Asian country to "most likely to be second" to his company in electric vehicles.

Despite the fact that many legacy automakers like General Motors, Ford, Hyundai Motor Group and Volkswagen are on the offensive in the electric vehicle space, churning out EV after EV, Tesla's CEO does not seem to be worried about them.

Asked about Tesla's competition on the Q4 2022 and full-year earnings call, Musk replied that he respected carmakers in China, which he believes are the most competitive in the world. While he did not identify any Chinese automakers by name, he was likely referring to rivals like BYD, Nio and XPeng, to name only a few.

"They work the hardest and they work the smartest. And so if I were to guess, probably some company out of China is the most likely to be second to Tesla," Musk said. 

China is Tesla's second-largest market and the top market worldwide for electric vehicles – it made up about two-thirds of all EV sales globally in 2022. The country is also home to Tesla's biggest plant, Gigafactory Shanghai, which produced more than 710,000 electric vehicles last year, over half of its global output.

Gallery: Tesla Giga Shanghai (Tesla Gigafactory 3)

"Our team is winning in China. And I think we actually are able to attract the best talent in China. So hopefully that continues," Musk added. 

Elon Musk has made no secret of his appreciation for Chinese workers in the past. He praised Tesla China boss Tom Zhu and his team for "burning the 3 a.m. oil" to keep Tesla's factory running during COVID lockdowns last year. Actually, Elon Musk recently promoted Tesla China chief Tom Zhu to run US factories and sales in North America and Europe. 

Tesla's CEO has also praised Chinese rivals before, calling automakers from China the "most competitive in the world" in 2021, when he also singled some of them out for being very good at software.

China's leading electric vehicle maker is BYD, which ranked second behind Tesla in 2022 in global BEV sales with 911,141 units, compared to the US company's 1,313,851.

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