• Nissan's shares jumped after a report said Tesla was being courted as an investor.
• The Financial Times said a consortium of high-profile figures in Japan were involved.
• Musk quickly rejected the idea, and Tesla's focus on robotaxis means it's an unlikely Nissan savior.

Nissan is looking for a savior, but despite what some investors hope, it won't be Elon Musk, he indicated.

Shares in the beleaguered Japanese carmaker surged 9.5% on Friday amid reports that Tesla was being courted as an investor, even though Musk quickly poured cold water on the idea.

The Financial Times said a consortium of Japanese investors and former politicians planned to approach Tesla to discuss an investment, based on the belief that the US automaker was interested in buying Nissan's factories in the US.

While Tesla has its own extensive manufacturing operations in the US, acquiring Nissan's factories in Tennessee and Mississippi would allow it to boost domestic production as the Trump administration proposes a new round of tariffs on imported cars.

But the suggestion that Tesla might be interested in Nissan's factories was quickly shot down by Musk.

"The Tesla factory IS the product," he wrote on X in response to the Financial Times report.

"The Cybercab production line is like nothing else in the automotive industry," Musk added, referencing Tesla's coming steering-wheel-less robotaxi.

In a post on X, Hiro Mizuno, a former Tesla board member and one of the figures named in the FT's article, denied being involved. Mizuno said he doubted Tesla would be interested in Nissan's factories as Tesla's factory design is so "unique."

The report on an attempt to get Tesla to invest is a sign of how desperate things have become for Nissan.

The ratings agency Moody's downgraded the Japanese auto giant's credit rating to junk status on Friday, a week after a proposed $50 billion merger with Nissan's rival Honda fell through.

Nissan's sales have plunged in China and the US thanks to fierce competition from Chinese EV companies and a lackluster hybrid lineup, and the automaker is in dire financial straits.

The company's profits have crash, and it projected an annual loss of 80 billion yen, or about $519 million, in its earnings report last week.

Its disastrous financials have left it looking for investment, with the iPhone manufacturer Foxconn a prospective suitor.

Nissan CEO Makoto Uchida, who has pledged to turn things around by cutting 9,000 jobs globally and slashing global vehicle production, said Nissan would explore all options "without taboos" to ensure the company's future.

As it stands, Tesla seems like an unlikely savior.

Tesla's production lines heavily use advanced manufacturing techniques, such as gigacasting, in which giant presses create large sections of vehicles. So converting Nissan's factories would likely be difficult and expensive.

Musk has also pivoted the company away from mass-produced electric vehicles and toward autonomous vehicles and robotics, such as the self-driving Cybercab and Tesla's Optimus robots.

In May, Tesla quietly dropped its goal of building 20 million cars annually. And Reuters reported in April that the company scrapped plans to build a $25,000 EV, though Musk has said more affordable models are still coming this year.

The automaker has its own headwinds, with Tesla recording its first-ever annual sales decline last year and facing an uncertain EV landscape in the US thanks to Trump's rollback of federal support for electric vehicles.

Nissan declined to comment. Tesla did not immediately respond to a request for comment.

• Affordable Chinese electric vehicles are flooding into global markets — but not the US.
• Tesla rivals BYD and Xpeng are bringing their ultra-smart EVs to a host of new countries.
• High tariffs have locked them out of the US, meaning American drivers may be cut off from cheap EVs.

Tesla's China headache might be about to become a global one.

Elon Musk's automaker has come under increasing pressure in the world's largest car market from local EV giant BYD and its rivals, who are now competitive with the Model Y manufacturer on both price and technology.

In January, BYD sold nearly double the number of EVs as Tesla, with the US carmaker's sales slumping by 11% from the previous year.

BYD increased the heat last week with its announcement that "God's Eye" self-driving tech would be offered in nearly all its vehicles, including the $9,500 Seagull. Tesla is still waiting for regulatory approval for its rival FSD system in China.

The most concerning thing about BYD's sales for Tesla — and other Western automakers — is where they're coming from.

BYD sold 66,000 vehicles outside China in January, a record figure that suggests the company's efforts to become a global powerhouse are bearing fruit.

The EV maker, which once received backing from Warren Buffett, beat Toyota to become Singapore's top-selling car brand last month, and overtook Tesla's sales in the UK for the first time.

With BYD's affordable electric and hybrid offerings gaining traction overseas, other Chinese EV players are beginning to follow their lead — a move that analysts and industry execs fear could export the so-called "hypercompetition" of China's home market globally.

European offensive

The debut of Chinese EV startup Xpeng in the UK was no ordinary car launch.

Tech executives and delegates from the Chinese embassy swanned through a grand hall within sight of Tower Bridge that was once a historic fish market, munching canapes and mingling around Xpeng's X2 flying car on display alongside its electric sedans and SUVs.

It's a sign of the tech company ethos that Xpeng's executives were keen to highlight as they announced the company's first UK launch: the G6 SUV, priced about £6,000 ($7,500) less than Tesla's Model Y.

The UK is Xpeng's newest market. It has also launched in France, Germany, and Italy in recent months. President Brian Gu said the company plans to expand its presence to more than 60 countries and regions in 2025.

"Our ambition is to be the No. 1 Chinese premium electric vehicle brand overseas," said Gu, adding that he defined "premium" EVs as costing more than $41,000.

For brands like Xpeng, which still records big losses and lags well behind BYD in China's highly competitive EV market, international expansion may be a necessity rather than a luxury.

"The China market is ultra-competitive, so it's going to be really difficult for them to carve out huge market share gains in the short-term because of the price war," Tu Le, managing director of Sino Auto Insights, told Business Insider.

While the UK has not imposed tariffs on Chinese electric vehicles, making it a tempting target for expansion, the European Union followed the US last year in imposing import taxes of up to 35% on EVs made in China.

That has not stopped brands like Nio and Leapmotor, which has a partnership with Jeep-owner Stellantis, from joining BYD and Xpeng in moving into the continent.

Their expansion has put local automakers on notice. Volvo Cars CEO Jim Rowan told BI that he doesn't believe EU tariffs will stop Chinese EV companies from becoming major players in Europe.

The boss of the Swedish carmaker said the influx of Chinese vehicles into Europe, alongside brutal competition in China, will force local automakers to up their game.

"As the non-Chinese brands lose market share in China, they're going to have to find market share somewhere else. That means they're going to become more competitive in their home markets and global markets around the world," Rowan said.

US risks being left behind

One market that China's EV champions are unlikely to target anytime soon is the US, thanks to 100% tariffs on imported Chinese vehicles introduced by the Biden administration.

These import levies mean the US has had to watch as other regions like Europe get access to affordable electric models like the $32,000 BYD Dolphin, and local brands like Renault launch their own mass-market EVs to compete.

The absence of this trend has helped keep US electric vehicle prices high, with customers paying around $8,000 more on average for an EV compared to Europe. This raises fears that US consumers could be cut off from accessing affordable electric models.

"On the current trajectory, the US is going to get cut off. There are 95 countries outside China where you can buy BYD cars, and we can't," said Tu Le.

Legacy US automakers have been slow to shift to electric vehicles, with companies like Ford and General Motors rolling back ambitious EV strategies over the past year.

President Donald Trump has also vowed to remove emissions targets and scrap federal support for electric vehicles, a move that will likely slow the transition to electric vehicles.

Tu Le warned that a lackluster EV industry in the US risked making the American auto industry less globally competitive, hurting the ability of the likes of Ford and General Motors to compete with their Chinese rivals overseas.

"I'm hopeful we can change the culture and bring products to market that are competitive globally, not just in the United States. As things are, it feels like the Detroit two are effectively on their way to becoming single-market companies," he said.

• Nikola, an electric-truck startup, was once worth more than Ford but recently filed for bankruptcy.
• The truck maker faced a high-profile fraud scandal and eventually ran out of money.
• Nikola is the latest formerly buzzy EV startup to collapse.

Another would-be Tesla rival has filed for bankruptcy, in the latest sign of how difficult it is to make money off electric vehicles.

Nikola, which makes electric and hydrogen trucks, on Wednesday said it had filed for Chapter 11 bankruptcy protection and would sell its assets amid a cash crunch.

Nikola rode a wave of enthusiasm for electric transportation when it went public in 2020 and at one point was worth in excess of $30 billion — more than Ford at that time.

Nikola struck a major deal with General Motors but was engulfed in crisis after its founder, Trevor Milton, was accused of misleading investors about Nikola's business and technology.

In 2020, the short-seller Hindenburg Research revealed a substantial short position in Nikola and published a scathing 15,000-word report saying it believed the EV maker was "an intricate fraud built on dozens of lies."

"We have never seen this level of deception at a public company, especially of this size," the report said.

It detailed a litany of allegations, including that a publicity video purporting to show a prototype of Nikola's electric truck driving along a road was actually shot by rolling the truck down a hill.

Milton resigned and was later sentenced to four years in prison. The Securities and Exchange Commission fined Nikola $125 million in 2021.

Nikola recovered somewhat, striking a deal last year to sell 100 trucks to a California logistics company and announcing in January that its updated battery-electric trucks had driven 1 million miles.

But the startup, which recalled its entire fleet of big rigs in 2023 after several battery fires, ultimately failed to commercialize its technology.

Nikola lost more than $200 million in the third quarter of 2024. In October, the company said it had only enough cash to last until the first quarter of this year.

"The transition EVs has been slower than all manufacturers anticipated, and when it comes to commercial vehicles, that's a really tough segment to break into," Sam Fiorani, an industry analyst at AutoForecast Solutions, told Business Insider.

Fiorani said heavy-duty trucks and semis of the kind Nikola was building have specific needs, including quick refueling and long ranges, making them a difficult product to bring to market.

EV startups run out of charge

Nikola is the latest once promising EV startup to run out of money as EV sales growth has slowed over the past year.

Fisker, once worth as much as $8 billion, filed for bankruptcy last June after its Ocean SUV was plagued by production delays and software problems.

Canoo, an electric-van company that went public in 2020 through a special-purpose acquisition company, went the same way last month despite high-profile deals with NASA, Walmart, and the US Postal Service.

"Every investor 10 years ago was looking for the next Tesla," Fiorani said. "Venture capitalists were jumping into any EV startup and expecting them to pay off in five or 10 years."

Fiorani added that the arrival of higher interest rates shut off that supply of easy money.

"Keeping these companies financed takes more than just wishful thinking that someday they'll make money," Fiorani said.

Their failures show just how difficult — and expensive — it is to build a viable EV business from scratch, with companies spending enormous sums to build up production.

Only Tesla — which nearly went bankrupt several times over a period that its CEO, Elon Musk, has described as "production hell" — has been able to become profitable through selling EVs.

Musk's company now has the advantage of scale; Tesla was responsible for nearly half of EV sales in the US last year.

'Valley of death'

Even legacy automakers have struggled to make money on EVs. Ford lost $5 billion on its EV business last year, and the Detroit carmaker told investors it's likely to lose another $5 billion this year.

Other startups remain mired in what has been termed the EV "valley of death."

Rivian went public in 2021 at a valuation of $86 billion, but it lost about $39,000 on each vehicle it sold last quarter. As it burns through cash, it has sought funding from Volkswagen and the federal government.

Losses at Lucid Motors widened to nearly $1 billion in the third quarter. It has relied on funding injections from its largest shareholder, Saudi Arabia's Public Investment Fund.

"It's a measure of how hard it is to make money and turn a successful business out of an automotive company, EV or otherwise," Fiorani said.

"In North America, we've seen one successful vehicle startup since World War II. Tesla is the only one that has turned a profit."

• Elon Musk's tunneling firm has announced plans to build a 10.5-mile tunnel network in Dubai.
• The Boring Company has already built a "loop" in Las Vegas, which ferries people through tunnels in Teslas.
• Boring's loops are still a long way from the futuristic "hyperloop" proposed by Musk in 2013.

Elon Musk's Boring Company wants to set up its Tesla-carrying tunnel network in Dubai.

The tunneling company announced on Thursday it had signed a memorandum of understanding with Dubai's roads and transport authority to build a 10.5-mile tunnel system in the Gulf city-state.

The initial pilot project will have 11 stations and transport around 20,000 passengers an hour, the Boring Company said, with plans to eventually expand the transit system to carry 100,000 passengers an hour.

The company called it "a landmark collaboration poised to set the standard for urban mobility."

The company didn't give a timeline for the Dubai project, which would be the Boring Company's second location.

Musk's tunneling firm's only operational loop is under the Las Vegas Convention Center, where passengers are transported through around 1.8 miles of tunnels in Tesla vehicles at speeds of around 40 miles per hour.

The Boring Company's Las Vegas loop — and its planned loop in Dubai — are a long way from the science-fiction "hyperloop" concept Elon Musk sketched out in a 2013 white paper.

The billionaire proposed a system of low-pressure tubes that would transport commuters in pods at speeds as high as 760 miles per hour.

The Boring Company was founded in 2017; partly to bring the "hyperloop" concept to life. Musk said he founded the company after being driven "nuts" by LA traffic.

The company is expanding its Vegas Loop into a 68-mile tunnel network though this has run into obstacles. The city's monorail was temporarily shut down last year after Boring Company employees reportedly dug close to pillars holding it up.

The Boring Company is led by Steve Davis, one of Musk's closest associates.

He is involved with DOGE, the new department Musk is leading to drive spending cuts in the US federal government, per a list of staff working there, that Business Insider obtained.

• NASA's acting administrator said the space agency is expecting a visit from DOGE.
• Janet Petro said Elon Musk's cost-cutting unit would be coming to examine its payments.
• SpaceX, the rocket company founded by Musk, has NASA contracts worth billions of dollars.

DOGE is tearing through government agencies — and NASA may be next in line.

Speaking on the sidelines of the Commerce Space Conference in Washington DC on Wednesday, the space agency's acting administrator confirmed that NASA was expecting a visit from Elon Musk's cost-cutting unit.

"So we are a federal agency. We are going to have DOGE come. They are going to look — similarly to what they've done at other agencies — at our payments," said Janet Petro, in comments reported by Bloomberg.

Since it was established by President Donald Trump last month, DOGE has cast its net over a wide variety of government agencies, shutting down USAID and targeting the Treasury, the FAA, and FEMA.

As the unit turns its attention to NASA, it will be scrutinizing an agency that does extensive business with Musk's SpaceX.

NASA has struck around $14.5 billion in contracts with the billionaire's rocket company. SpaceX is set to carry astronauts to the moon as part of NASA's Artemis missions, and was awarded an $843 million contract to deorbit the International Space Station last year.

Despite SpaceX's involvement in Artemis, Musk has criticized the program as "extremely inefficient" and called missions to the Moon "a distraction," suggesting that space efforts should be focused on Mars instead.

SpaceX is set to launch multiple Starship missions to the red planet over the coming decade, and Musk has been an outspoken proponent of colonizing Mars for years.

Musk has been highly critical of some of NASA's other contractors. Last year, he suggested that Boeing should face fines over its troubled Starliner program, which said in a post on X had "put astronauts at risk."

The Tesla CEO's effort to audit government spending has also relied on individuals connected to his many companies. A DOGE staff list seen by Business Insider included several employees with connections to SpaceX, including a former intern and an investor whose firm took a stake in a SpaceX supplier last year.

Despite this, Petro said NASA's strong conflict-of-interest policies would apply to any DOGE representatives working at the agency.

"Any employee or any person that's coming in, we will check out their conflict of interest, make sure they don't have any conflicts of interest with any of the companies that we work with," she told reporters.

Petro is set to be replaced by incoming NASA administrator Jared Isaacman, a billionaire astronaut who has flown multiple private missions for SpaceX. His appointment is yet to be confirmed by the Senate.

SpaceX and NASA did not immediately respond to requests for comment.

Do you work at NASA or have information to share? Contact this reporter at [email protected] or tcarter.41 on Signal.

• Nissan and Honda said they canceled their $50 billion merger
• The merger would have created the world's third-largest automaker.
• Both Japanese companies face declining sales and a slow transition to EVs.

Nissan and Honda called off a $50 billion merger that would have formed one of the world's largest car companies.

The Japanese automakers said on Thursday they scrapped the deal, announced in December, "to prioritize speed of decision-making and execution of management measures" in an "increasingly volatile" market.

The companies said they would continue to work within a "strategic partnership."

Nissan CEO Makoto Uchida said Honda's desire to make his company a subsidiary rather than a partner played a key role in the deal's collapse.

"While both companies have a long history, we were not sure whether this would reflect our autonomy or allow us to demonstrate our potential or strength," he told a press conference.

Both companies released earnings on Thursday shortly after the deal's collapse.

Honda reported a 25% rise in pre-tax profit in the latest quarter, buoyed by strong US sales and its high-performing motorcycle business.

It still faces a major headache in China, where sales collapsed almost 40% in the nine months to December, but its financial position looks decidedly more rosy than its rival.

Nissan's profits crashed to 5.1 billion yen ($33 million) for the nine months to December, down from 325 billion yen ($2.1 billion) in the same period for 2023. It projected an annual loss of 80 billion yen ($519 million).

A scarcity of electric models has seen Nissan lose market share in China to local rivals, while its US sales have also suffered due to a lack of hybrid options and its EV's failure to qualify for $7,500 government tax credits.

Nissan stock has fallen about 25% over the past year. After being about the same size as Honda a decade ago, its market capitalization is now about a fifth of its rival. Honda stock is down about 15% in the same period.

Uchida is now racing to execute a turnaround plan that will involve cutting 9,000 jobs globally. He warned that all options were on the table to ensure the storied automaker's survival.

"Given the latest performance of the company and the changing environment, it is essential to explore all the options without taboo and carry out a deeper structural reform," Uchida said.

Nissan gave more details about its restructuring plans on Thursday, unveiling plans to cut 6,500 jobs at the company's factories in Tennessee, Mississippi, and Thailand.

It also plans to cut global vehicle production by 1 million to 4 million in the 2026 financial year.

Tariffs headache

Both Nissan and Honda also face a looming headache in the form of potential US tariffs on vehicles imported from Mexico and Canada, where the two companies have factories.

Uchida said Nissan would consider moving production from Mexico to other regions if the tariffs go ahead after the temporary suspension expires in March.

Honda vice president Shinji Aoyama said the automaker was racing to export vehicles made in Canada and Mexico into the US before the waiver expired.

The breakdown of the Honda deal leaves Nissan looking for investment elsewhere. The chairman of Apple supplier Foxconn said the Taiwanese firm was considering buying the 36% stake in Nissan owned held by France's Renault.

Private equity firm KKR is also considering an investment in Nissan, Bloomberg reported.

• DeepSeek has shaken the global tech industry and sparked an outpouring of national AI pride in China.
• Now, the country's EV giants are jumping on the DeepSeek bandwagon.
• EV firms BYD, Geely, and Great Wall have all announced plans to put DeepSeek's AI models into cars.

DeepSeek has sparked an outpouring of national AI pride in China, and now the country's EV giants are racing to add it to their vehicles.

Tesla rivals BYD, Geely, and Great Wall have all said they will integrate DeepSeek's AI model into their in-car software in recent weeks as they look for an edge in China's tech-obsessed electric vehicle market.

DeepSeek caused upheaval in the global financial markets and shaved nearly $600 billion off the value of chipmaker Nvidia when it released its R1 reasoning model last month.

The Chinese hedge fund-turned-AI lab's model matches the performance of equivalent AI systems released by US tech firms like OpenAI, despite claims it was trained at a fraction of the cost.

Its success has seen China's EV companies — which also have a track record of upsetting their Western rivals with low-cost offerings — pile in on the buzzy AI model.

At an event announcing a new advanced autonomous driving system on Monday, Tesla nemesis BYD said it would incorporate DeepSeek's AI into its Xuanji vehicle software and assisted driving tech to improve its vehicles' AI capabilities.

BYD rival Geely, which owns the EV brands Zeekr and Polestar, is integrating R1 into its Xinrui AI model, according to local media reports.

Automaker Great Wall confirmed to Reuters last week that it had incorporated DeepSeek's AI model into its "Coffee Intelligence" connected vehicle system. Legacy brand Dongfeng has also said vehicles made by its joint venture with Nissan would feature DeepSeek's models.

DeepSeek's rapid ascent has turned the company into a poster child for China's AI efforts, with local media hailing CEO Liang Wenfeng as the "AI hero of Guangdong."

Adding the latest AI models is motivated by more than national pride for these automakers, however. Chinese customers are increasingly demanding so-called "EIVs" packed with AI technology, self-driving tech, and advanced in-car software.

Geely, Great Wall, and Dongfeng did not respond to requests for comment from Business Insider, sent outside normal working hours.

• BYD is going all-in on autonomous driving as it looks to take Tesla's EV crown.
• The Chinese automaker shared a major expansion of its "God's Eye" intelligent driving system on Monday.
• The $9,500 Seagull EV will also get "high-level" intelligent driving features, a BYD exec said.

BYD is battling Tesla for the title of the world's largest EV company — and now the Chinese upstart is coming for Elon Musk's self-driving crown.

The electric vehicle giant unveiled a massive expansion of its intelligent driving system on Monday as it seeks to fight off brutal competition in the world's most competitive car market with a new lineup of high-tech vehicles.

BYD said it would include its "God's Eye" self-driving tech, which enables features such as remote parking and autonomous overtaking, on its entire model lineup.

The company's shares on the Hong Kong Stock Exchange hit an all-time high after the announcement, rising 4% on Tuesday morning.

Prior to the event, BYD executive Zhang Zhuo said the company would release 11 models with BYD's "God's Eye" self-driving tech across its Ocean brand.

The ultra-cheap BYD Seagull, which currently starts at 69,800 yuan (around $9,550) in China, will also get "high-level" intelligent driving features, Zhuo wrote in a post on the Chinese social media site Weibo.

BYD general manager Lu Tian, meanwhile, said that the company's six main brands — named after Chinese imperial dynasties — would be fully upgraded with the new technology.

The automaker also said it would integrate home-grown AI models built by Deepseek into its vehicles, joining several of its local rivals in partnering with the Chinese AI phenomenon.

BYD's move into autonomous driving comes as Chinese carmakers increasingly shift toward "EIVs," or electric intelligent vehicles, outfitting their cars with increasingly advanced technology as they fight for a slice of China's hypercompetitive EV market.

Smartphone maker Xiaomi's SU7, which starts at around $30,000 and comes with intelligent driving assist and voice control technology, has smashed sales targets since it launched last year.

Other manufacturers, such as startup Xpeng, have rolled out "AI-defined" vehicles, while Zeekr, Great Wall, and Dongfeng have already incorporated Deepseek's AI into their cars.

Not to be outdone, BYD has pledged to spend at least $14 billion on building "intelligent" vehicles.

Its "God's Eye" driving assistance tech will face competition from Xpeng and fellow EV startup Nio, which have their own autonomous driving systems.

BYD will also face off against Tesla, with the US automaker saying it is working to begin selling its Full Self-Driving tech in China this year.

The EV giant's sales have been booming even before it unveiled its self-driving push. BYD sold 296,446 EV and hybrid vehicles in January, up 47% from the same period in 2024.

BYD's impressive performance comes as warning signs appear that China's crowded EV market may be about to face a period of consolidation.

Chinese state-owned carmakers Dongfeng and Changan both announced restructuring moves on Sunday, with the two companies seeing their share prices soar as investors speculated they may be about to merge.

• Robotaxis have hit the mainstream, with Waymo and Tesla planning major expansions in 2025.
• Concerns about the huge cost of self-driving vehicles have prompted Ford and GM to exit the race.
• May Mobility CEO Edwin Olson told Business Insider that robotaxis are a "brutal" business.

The robotaxi wars have begun — but questions over cost are already forcing some contenders to wave the white flag.

The likes of Ford and General Motors are giving up on robotaxis because they're a "brutal business," Edwin Olson, the CEO of autonomous driving company May Mobility, told Business Insider in January.

Olson, who founded May in 2017, said the sheer cost of scaling up autonomous ride-hailing services was leading companies to back away from robotaxis, with firms such as Waymo only able to expand thanks to the massive checkbooks of their Big Tech-backers.

"Robotaxis are a brutal business. The revenue per hour that you can earn is maybe $30 or so, and that drops off outside peak hours," he said.

"The revenue potential is quite low. You have to go to the very largest markets where you can drive your asset utilization as high as possible so that you can get as close as possible to $30 an hour, 24 hours a day, seven days a week. Then you have a chance of being able to make some money."

The robotaxi industry has seen a dramatic expansion over the past year, with Google-backed Waymo hitting 150,000 paid rides a week and Elon Musk unveiling Tesla's dedicated "cybercab" robotaxi.

At the same time, the long-awaited arrival of self-driving cars has proven highly expensive.

Despite its rapid growth, Waymo is not yet profitable, with Alphabet's "other bets" division (which includes Waymo, as well as other subsidiaries) losing $1.17 billion in the fourth quarter of 2024.

A recent McKinsey study found robotaxis could cost about $8.20 per mile to run, and Bernstein analysts estimated that the cars themselves can cost roughly $150,000 each.

The hefty price tags have already forced some players out of the game.

Legacy automakers Ford and General Motors have both scrapped plans to build dedicated robotaxis, with GM pulling funding for embattled self-driving firm Cruise despite spending billions on the company. Cruise said in early February it would lay off around 50% of its staff.

"I think GM, Ford, they were all looking at price tags well north of $10 billion. And they just decided, let's call it a day," said Olson, who previously worked at Ford's autonomous vehicle unit.

"Even if the technology was perfect … they're still years, maybe a decade, from reaching the breakeven point. In the meantime, they're going to continue to burn billions of dollars a year," he said.

Waymo's cash advantage

One company that is less cash-constrained than its legacy auto-backed rivals is Waymo. The robotaxi startup is owned by Google parent Alphabet, which led a $5.6 billion funding round in October.

"That's why Waymo is still here — they've basically got Alphabet's checkbook," said Olson.

"I think people have a lot of confidence that they're going to be able to continue to cough up the cash, to just push through to profitability however long it takes," he added.

May runs autonomous vehicle services in 10 cities across North America and Japan and has adopted a different strategy as it seeks to compete with Waymo.

The company has mainly focused on long-term public transport contracts with businesses and governments. Olson said that strategy offers much higher revenue potential than ride-hailing and has enabled May to make money on nearly all of its US sites.

"We have probably at scale the autonomous vehicles that would have the lowest price point," Olson said. "We've brutally optimized this vehicle to operate in the places where buses go, and that's allowed us to bring the cost down." May's total compute footprint was around a third of its competitors, he added.

Olson said this has put May in a good position to finally enter the robotaxi market this year, with the company set to deploy robotaxis on the Lyft app in Atlanta in the coming months.

Saber Fallah, a professor of Safe AI and Autonomy at the University of Surrey, told BI that May's approach of prioritizing public transport contracts may signal a more sustainable strategy for self-driving startups.

"Unlike robotaxis, which operate in highly dynamic and unpredictable urban environments, autonomous public transport systems benefit from predefined routes and structured operating conditions," Fallah said.

"This level of predictability significantly reduces the complexity of autonomous driving, making deployment more feasible in the near term," he added.

Running robobuses has other advantages over the cut-throat world of ride-hailing. Michael Lenox, a professor of business administration at the University of Virginia, told BI that robotaxi firms like Waymo might find that their margins are squeezed as competition heats up.

"The advantage of public transit contracts is the ability to be the sole provider in a given market, basically becoming a monopoly provider," Lenox said.

Tesla enters the race

Although Olson is confident that May can take on Waymo, the company is also set to contend with Tesla's looming entry into the robotaxi business.

Elon Musk unveiled the steering-wheel-less Cybercab at a glitzy Hollywood event in October and has said Tesla plans to launch a robotaxi service in Austin in June.

Olson said he was skeptical about the approach taken by Tesla, with Elon Musk's company relying on cameras and AI to run its Full Self-Driving technology.

"It's clear that eventually you'll be able to do this purely optically using cameras … but that's not where the camera technology is today," said Olson. "The computer vision networks are just not good enough to achieve the level of reliability."

Musk's robotaxi ambitions could be boosted by his influence with President Donald Trump, with reports suggesting federal rules for self-driving cars may be one of the new administration's transport priorities.

Despite fears in some quarters that Musk could use his position to boost his own prospects at the expense of his rivals, Olson said that his presence could help shake up the "patchwork" rules around robotaxis in the US.

"I think in general, given who's at the helm, if they are able to push through new federal-level regulatory standards, they're likely to be favorable to the AV industry," said Olson.

Do you work in the robotaxi industry or have thoughts to share? Get in touch with this reporter at [email protected]

• Transport officials are halting approval for new EV chargers funded by the $5 billion NEVI program.
• It's the latest sign Trump is going after federal EV initiatives, including those benefiting Tesla.
• Elon Musk's automaker has received $31 million in funding from the NEVI program.

Donald Trump's administration is halting a funding program for EV chargers that has awarded Tesla millions in federal grants.

Officials are "immediately suspending" approval for all state plans funded by the National Electric Vehicle Infrastructure (NEVI) program, a $5 billion initiative to build a network of EV chargers across the US, according to a memo to state transport directors released on Thursday.

The memo said leaders at the Transportation Department had "decided to review the policies underlying" the implementation of the NEVI program, with updated draft guidance due to be published this spring.

Until then, "no new obligations may occur" under the NEVI program, a move which puts plans to build EV chargers across multiple states announced late last year into limbo.

With the scarcity of EV chargers still one of the main concerns putting people off buying electric vehicles, the dismantling of the program will likely be a major blow for EV adoption in the US — and for Tesla, which has been one of NEVI's biggest beneficiaries.

The Elon Musk-run automaker has received $31 million in funding through the NEVI program, according to a dashboard run by transportation officials, making it the third largest recipient of funds.

Introduced as part of the $1.2 trillion Infrastructure Investment and Jobs Act in 2021, the NEVI program was a key pillar of the Biden administration's plan to build a national network of EV chargers.

Trump, by contrast, has vowed to roll back the "EV mandate" and scrap federal support for electric vehicles.

The new president signed an executive order on the first day of his second term ordering an immediate pause of the distribution of funds under the NEVI program.

Further measures could also have a major impact on Tesla, which is the largest seller of EVs in the US, with Trump's team reportedly considering scrapping the $7,500 tax incentive for new electric vehicles.

Tesla benefits directly from the tax credit and recently began advertising the Cybertruck with the discount.

That hasn't stopped Elon Musk, who has taken a prominent role in the Trump administration and is one of the president's most outspoken supporters, from saying he supports the move.

The billionaire has argued that ditching the tax credit would be a "long-term" positive for Tesla but would "devastate" the company's rivals, which make up the rest of the EV industry.

Tesla did not respond to a request for comment, sent outside normal working hours.

Are you a federal worker or do you work on EV charging? If you have anything to share, get in touch with this reporter at [email protected] or tcarter.41 on Signal. Do not use a work device.

• Volvo's Jim Rowan told BI he didn't think governments should give incentives to people buying EVs.
• President Donald Trump has vowed to roll back electric vehicle subsidies in the US.
• Rowan joins the Tesla boss Elon Musk in arguing that subsidies for EVs are a bad idea.

Elon Musk isn't the only auto boss who thinks subsidies for electric vehicles are a bad idea.

Jim Rowan, the CEO of the Swedish auto giant Volvo Cars, told Business Insider that he disagreed with the idea that governments should subsidize the EV industry, as President Donald Trump unravels federal support for electric vehicles in the US.

"I don't subscribe to the fact that government should give incentives for people to buy EVs," Rowan said in an interview after Volvo released its 2024 results on Thursday.

"I think governments have got enough to spend money on, in terms of healthcare and education, that they shouldn't need to subsidize industries."

Rowan added, "I would like to see them do more about infrastructure to encourage people to buy EVs, or tax incentives, but I'm not a proponent of actual subsidies themselves."

Trump has signed a series of executive orders signaling his intent to scrap EV subsidy programs and emissions targets, with reports suggesting the new administration is planning to ditch the $7,500 tax credit for new EVs in the US.

Auto industry experts have warned that cutting the tax credit could make electric vehicles unaffordable for many Americans, but that hasn't stopped Musk, a Trump ally, from expressing support for its demise.

"End all government subsidies, including those for EVs, oil and gas," he wrote in a post on X last year.

Musk has argued that ending the incentive would devastate Tesla's competitors but help the company in the long run, even though many buyers of Tesla's vehicles benefit from the $7,500 credit. Tesla began advertising the Cybertruck with the tax credit this week.

The withdrawal of US government support for EVs adds to the storm clouds facing automakers this year; the trade war sparked by Trump in the past month also threatens to severely disrupt the auto industry.

In an earnings call after Volvo Cars released its fourth-quarter results, Rowan predicted the industry would be "severely tested" in a "challenging" 2025.

The Swedish automaker, which last year abandoned plans to sell only EVs by 2030, said operating income and margins declined in the latest quarter. Its shares fell by as much as 10% on Thursday.

Rowan told BI that Volvo may have to reconsider the economics of producing future vehicles in Europe if Trump follows through on his threat of imposing tariffs on the European Union. He added that trade levies on the EU could raise car prices in the US.

"Ultimately it might make it more expensive for the end customer," Rowan said, adding that depending on the severity of tariffs automakers may choose to pass the cost onto consumers rather than shift production.

"If you're going to move production that's expensive," Rowan said, adding that if the tariffs are "below a certain amount, it doesn't make sense — you've just got to eat those tariffs or try and pass them on to the customer."

Volvo, which is owned by the Chinese conglomerate Geely, has already faced tariff headaches over its EX30 electric SUV.

With a starting price of about 38,000 euros, or about $39,600, the EX30 has proved popular in Europe, but its debut in the US was delayed as a result of the 100% tariffs on Chinese-built EVs introduced by the Biden administration last year.

Some EX30 trims are available in the US, at a starting price of $44,900, and Volvo is set to start producing the EV at its Belgium factory in the first half of this year. But Rowan said the uncertainty around tariffs was making an already difficult outlook for the auto industry more complicated.

"When you have a changing landscape of tariffs, it just makes it more complex and costly to navigate through," he said.

• Toyota's sales in China are slumping as it faces brutal competition from local EV giants like BYD.
• The Japanese automaker plans to fight back by taking a page from Elon Musk's playbook.
• It said Wednesday it would build a fully owned EV factory in Shanghai, after Tesla did the same in 2019.

Toyota is taking a page out of Elon Musk's playbook as it plots a comeback in China.

The Japanese automaker announced on Wednesday that it would build a new EV and battery factory in Shanghai, as it seeks to turn around stuttering sales in the world's most competitive car market.

Toyota will fully own the new factory, which it says will have the capacity to produce 100,000 electric vehicles a year for the Lexus brand from 2027.

The facility will see it join Tesla as part of a select group of foreign automakers who run their own Chinese operation, along with Tesla's Shanghai gigafactory and a VW plant in eastern China.

Foreign carmakers were previously required to enter into partnerships with local companies to build cars in China, though those rules were relaxed in 2018.

The new factory marks a change in strategy for Toyota, which currently sells cars in China through joint ventures with local firms FAW and GAC.

The world's largest automaker has struggled in China, with sales dropping nearly 7% in 2024 amid brutal competition from homegrown EV giants like BYD.

Toyota's decision to prioritize hybrids over battery electric vehicles has seen the company avoid the slumping sales and financial difficulties that have hit some of its rivals.

But it has also meant Toyota has struggled to compete with the wide range of low-cost electric vehicles on offer in China, with BYD selling EVs for as little as $10,000.

The Japanese giant is trying to change that, in part by following Tesla's lead.

Tesla opened its Shanghai gigafactory in 2019, after Elon Musk pushed for a relaxation in China's foreign ownership rules.

Production at the factory scaled up rapidly, and by 2021, around half the company's global deliveries came from the Shanghai site.

China has since become one of Tesla's most important markets, with Tesla selling around 657,000 electric cars in the country last year as it competed with local rivals in a brutal price war.

Toyota's strategy shift in China comes as the company reported a 27% drop in quarterly profit in its latest earnings.

Toyota's vehicle sales also dropped slightly to 10.8 million vehicles, enough to retain the title of world's largest automaker but raising concerns that the hybrid boom that has fuelled Toyota's recent growth may be slowing down.

Despite this, Toyota raised its full-year profit forecast by 400 billion yen ($2.6 billion) to 4.7 trillion yen ($30.7 billion) as it also announced its new $14 billion battery factory in North Carolina was ready to begin production.

Toyota did not respond to a request for comment, sent outside normal working hours.

• Elon Musk's political interventions are beginning to be a problem for SpaceX.
• The rocket firm is attempting to launch Starlink in South Africa even as Musk criticizes the country's laws as "openly racist."
• Ontario ripped up a Starlink contract in response to the threat of US tariffs from Musk ally Donald Trump.

Elon Musk has thrown himself head-first into politics — and that is causing problems for one of SpaceX's most prized assets.

Starlink, the satellite internet service operated by Musk's rocket company, has grown rapidly in recent years, launching in 27 new markets and tripling its internet traffic last year.

Musk's political interventions across the globe and presence in the Trump administration are now complicating the service's expansion drive.

The world's richest person attacked a Black empowerment law introduced by South Africa's coalition government, which requires foreign telecom companies to provide 30% equity to Black-owned businesses to be granted operating licenses, as "openly racist."

Musk, who grew up in South Africa, has also railed against the country's land appropriation law, which allows the government to seize unused land in certain circumstances.

On Monday, President Donald Trump said the US would cut funding for South Africa over the law, which was intended to address the damage caused by colonial and Apartheid-era policies that restricted the ability of South Africa's Black majority population to own land.

South Africa hit back against Trump's move, with President Cyril Ramaphosa writing on X that the government has not "confiscated any land."

Musk's interventions in South African politics come as SpaceX waits to receive permission to launch Starlink there.

The rocket firm has launched its satellite internet service in other southern African nations, but is waiting for regulatory approval as politicians in South Africa debate whether to grant SpaceX an exemption to Black empowerment rules.

South Africa isn't the only place Musk's outspoken political interventions are causing a headache for SpaceX.

After donating more than $200 million to Donald Trump's campaign, the SpaceX founder has taken on a key role in the Republican president's administration, spearheading efforts to overhaul government spending with his so-called Department of Government Efficiency and even becoming a "special government employee."

Musk's status as one of the new administration's biggest personalities has made him a target as Trump has ramped up an aggressive trade war against Canada, China, and Mexico.

On Monday, Ontario Premier Doug Ford said the Canadian province would be "ripping up" its $68 million contract with Starlink because of a mooted 25% tariff on Canadian goods, which Trump later paused.

The backlash could spread to Musk's other companies, with Canadian prime ministerial candidate Chrystia Freeland suggesting the country could respond to the tariffs by imposing a 100% levy on Tesla vehicles.

Musk doesn't seem particularly concerned. "Oh well," he posted on X in response to the news that Ontario was tearing up the multimillion dollar contract.

SpaceX did not immediately respond to a request for comment from Business Insider.

• Trump's tariffs on Canada and Mexico could raise average new car prices by $2,700, Jefferies analysts found.
• The levies will hit automakers like GM and Stellantis, which import vehicles from Mexico, especially hard.
• Even Tesla would not be immune, with the company's CFO warning last week tariffs "would have an impact."

Donald Trump's tariff offensive has thrown the auto industry into chaos — and it could make your next car more expensive.

The president announced 25% tariffs on all goods imported from Canada and Mexico and a 10% levy on China on Saturday, a move Jefferies analysts warned could add $2,700 to the average price of a new car in the US.

The import taxes sparked global market uncertainty on Monday after all three countries vowed to retaliate. Canada has already done so, saying it will put a 25% tariff on $30 billion of US goods.

While Trump said on Monday the introduction of tariffs on Mexico would be paused for a month, if implemented, they will significantly impact US carmakers.

Lured by low labor costs and cheap parts, automakers have built up their presence in Mexico over the past few decades. Detroit's "big three" of Ford, General Motors, and Stellantis, as well as foreign powerhouses like Toyota and Nissan, all build vehicles in Mexico to import to the US market.

Even car companies that assemble their vehicles in the US, such as Tesla and Rivian, are likely to face higher costs thanks to the levies extending to vehicle and engine components.

In a note on Sunday, Jefferies analysts estimated that a 25% levy on goods imported from Canada and Mexico would add $43 billion to industry costs, with Ford, General Motors, and Stellantis being the most exposed.

Other estimates were equally dire. In a note seen by Business Insider, analysts for research firm Wolfe Research said the average price of a new car may climb by around $3,000.

Patrick Anderson, chief executive of consulting firm Anderson Economic Group, told The New York Times the tariffs could add $10,000 or more to the price of trucks and large vehicles imported from Mexico.

Auto executives have been bracing for the impact of Trump's tariffs ever since the Republican won the presidency for the second time in November.

In an earnings call last week, Tesla CFO Vaibhav Taneja said there was "a lot of uncertainty" around the taxes.

"Over the years, we've tried to localize our supply chain in every market, but we are still reliant on parts from across the world for all our businesses. Therefore, the imposition of tariffs, which is very likely, and any will have an impact on our business and profitability," Taneja said.

• Tesla made almost $2.8 billion off cars its rivals didn't sell last year.
• The company sells regulatory credits to automakers that haven't sold enough EVs to meet emissions rules.
• That lucrative side hustle is now under threat, with Trump vowing to scrap electric vehicle targets.

Elon Musk may have won the status of President Donald Trump's "first buddy" — but the new president could jeopardize one of Tesla's most lucrative side hustles.

Tesla has made billions selling regulatory credits to rivals in the past decade, but with Trump scrapping federal EV targets in his first weeks in office, that revenue stream is now under threat.

The automaker's regulatory credit business, which sees it sell emissions credits to automakers who haven't sold enough EVs to meet strict federal and state targets, made $692 million in the fourth quarter of 2024.

That strong performance, along with bumper sales of energy storage systems and an unexpected bitcoin windfall, added a bit of shine to what was otherwise a disappointing set of results.

Tesla's total automotive revenue dropped 8% from the same period in 2023 as rising competition and slowing EV sales growth hit the company hard, with Musk rallying investor enthusiasm by focusing on Tesla's robotaxi rollout and the Optimus humanoid robot.

While robotaxis and robots are yet to make an impact on Tesla's balance sheet, selling credits to rivals who have failed to shift enough EVs is a very real money-spinner for the company.

Tesla made $1.8 billion from the practice in 2023, and that figure grew to almost $2.8 billion last year as other automakers rolled back ambitious electric vehicle strategies amid stuttering demand for EVs.

But with Donald Trump back in the White House — with an assist from Musk — that income stream might be about to grind to a halt.

The president has vowed to roll back emissions targets and signed an executive order last week revoking a Biden-era target that 50% of new vehicles sold in the US should be electric by 2035.

"Tesla has relied on the credits to help really boost profitability," Stephanie Valdez Streaty, director of industry insights at Cox Automotive, told Business Insider.

"If federal guidelines are less stringent, then other manufacturers have more time and they're not going to need those credits as much, so I think it'll definitely impact it," she added.

Trump troubles

Current EPA rules mandate strict targets for automakers to cut the average emissions of their vehicle fleets every year. Those who fail to do so face substantial fines, which can be avoided by buying credits from automakers who sell a lot of EVs.

Because Tesla only sells EVs, this system allows the company to make money from something it is doing anyway. Its credits business was responsible for over a third of Tesla's net income in 2024.

Tesla will continue to make money off the practice in places like Europe, where the automaker could be set to bank as much as $1 billion from credit sales, and in various US states that have their own emission rules schemes.

However, Trump has signaled his intention to challenge state-level rules too, issuing an executive order last week that sought to terminate state rules designed to phase out combustion engine vehicles.

It comes as Tesla boss Musk expands his role and influence in the Trump administration, taking on a key cost cutting role at DOGE and even reportedly occupying office space in the White House.

Musk's status as "first buddy" has grown even as Trump has targeted EV incentives and subsidies that Tesla directly benefits from.

The Tesla CEO has expressed support for scrapping a key $7,500 tax incentive for new electric vehicles, a move reportedly considered by Trump's team. Musk has said publicly that he thinks the move would hurt Tesla's rivals more than his own company.

Alongside regulatory changes in the EV space, Tesla could also be stung by Trump's proposed tariffs on China. The company's CFO, Vaibhav Taneja, said on Wednesday's earnings call that the imposition of tariffs would "have an impact on our business and profitability."

Tesla did not respond to a request for comment, sent outside normal working hours.

• Tesla investors want more details about the company's robotaxi rollout ahead of its Q4 earnings.
• In an online Q&A, some raised concerns about the possible impact on Tesla of Elon Musk's move into politics.
• "How does the company cope with consumer relations when your CEO is a loose cannon?" asked one investor.

Elon Musk is "all-in" on Donald Trump's presidency — and not all of Tesla's investors are happy about it.

In an online forum for shareholders to submit questions ahead of Tesla's fourth-quarter earnings on Wednesday, investors asked for more details about the automaker's robotaxi rollout, while some voiced concern over whether Musk's political moves could hurt the company.

The questions come ahead of a crucial earnings release for Tesla. It is less than a month since the EV giant announced its first annual drop in sales.

The top question on the forum with over 3,000 votes asks whether Tesla is still planning to release "unsupervised" Full Self-Driving in Texas and California this year.

When he unveiled Tesla's Cybercab robotaxi last October, Musk said Tesla would have unsupervised, fully autonomous Model 3 and Y vehicles on the road in California and Texas in 2025.

The automaker is reportedly in talks to launch a robotaxi service in Austin, but Tesla has not yet been granted a permit to operate its cars autonomously without a safety driver in California, a vital step toward setting up a robotaxi operation in the state.

The Cybercab, meanwhile, faces a regulatory obstacle course thanks to strict federal rules around operating autonomous vehicles without a steering wheel or pedals.

Musk's influential position in the Trump White House could help smooth that road, with Transport Secretary Sean Duffy already signaling that his department will look to overhaul autonomous vehicle rules in the US.

Investors also had questions about the price and release date of the company's Optimus robot, which Musk has said is expected to go into limited production this year before going on sale to other companies in 2026.

Although the majority of questions concerned Tesla's upcoming product lineup, several raised concerns about Musk's position with the new administration and his recent political involvements.

"How will Tesla manage having a part-time CEO, with Elon being busy with DOGE, SpaceX, X and others?" read one question, which received votes from investors holding nearly 600,000 Tesla shares.

Several investors raised concerns about the potential rollback of the $7,500 federal tax credits for new EVs, which Musk has said he supports.

Others questioned the impact of Trump's threat of tariffs on China and asked whether sales had been lost "due to political activities of Elon."

Several investors referenced the controversial gesture Musk made during a speech at President Trump's inauguration, which some interpreted as a fascist salute.

"How does the company cope with consumer relations, when your CEO is a loose cannon? How can Tesla make me feel like my investment is worthwhile when your CEO is giving the salute behind the US seal?" read one question, which received 104 votes from investors representing 45,000 Tesla shares.

Tesla stock closed on Tuesday at $398, and has soared more than 100% over the past 12 months, valuing the company at $1.25 trillion.

Tesla did not immediately respond to a request for comment from Business Insider.

• DeepSeek has sent shockwaves through the technology, financial, and geopolitical spheres.
• The low-cost Chinese AI chatbot won't surprise anyone who knows Beijing's playbook.
• Chinese has disrupted many industries in similar fashion, including mining and electric vehicles.

A Chinese startup's launch of a ChatGPT rival has startled tech gurus, stunned investors, and stupefied geopolitical commentators. But DeepSeek's upheaval of the AI race shouldn't surprise anyone familiar with China's disruption playbook.

DeepSeek's debut of its latest AI models has flipped over the table, with venture capitalist Marc Andreessen hailing it as a "Sputnik moment" on X.

There was broad consensus that advancing artificial intelligence would require more and more computing power. Companies were poised to line up in droves to buy Nvidia's latest graphics chips, and pour money into building sprawling data centers.

President Donald Trump, SoftBank's Masayoshi Son, OpenAI's Sam Altman, and Oracle's Larry Ellison recently announced Stargate, a joint venture to invest at least $100 billion into US computing infrastructure to power AI progress, and as much as $500 billion over four years.

DeepSeek promptly released two AI models comparable to the available US ones, saying it spent less than $6 million on computing power for one, and relied on older Nvidia H800 chips. The company has said its open-source model is 20 to 50 times cheaper to use than OpenAI's o1 model, depending on the task.

The revelation floored many, especially as the US has restricted exports of powerful AI chips to China for years on national security grounds.

Investors suddenly realized Nvidia might not sell as many chips in the coming years as they expected. They promptly cut its market value by almost $600 billion on Monday — more than Mastercard, Exxon Mobil, or Oracle are worth. They also punished other US tech names, given the prospect of fierce foreign competition eating into future profits.

DeepSeek also upturned the narrative around the global AI race, as the US lead over China suddenly doesn't look so big. The startup's founder, Liang Wenfeng, reportedly attended a private gathering last week hosted by Chinese Premier Li Qiang, suggesting the state might see DeepSeek as a way to catch up to the US despite Washington's best efforts to starve it of the components it needs.

Given all the fanfare and drama, it's worth underscoring some skepticism around DeepSeek's claims regarding its models' capabilities, their total cost, and its reliance on older chips.

Hammer and tongs

DeepSeek is the latest example of a Chinese firm disrupting Western rivals with a lower-cost product, which has become something of a template or playbook.

For example, with the help of cheap state financing and the benefits of vertically integrated supply chains, Chinese companies have flooded the markets for commodities such as nickel, lithium, graphite, cobalt, and copper, pushing down prices and forcing some Western rivals out of business.

US, European, and Australian companies have struggled to be financially viable when prices are so low — especially as they face stricter regulations and steeper labor costs than their Chinese rivals — Hani Abuagla, a senior market analyst at XTB MENA, told Business Insider.

Rock-bottom prices also discourage Western companies from making new investments, and Chinese firms have struck supply deals in resource-rich regions of Africa and South America that keep out foreign competition, he said.

China's "ability to scale production rapidly often catches other regions off guard, leading to periods of oversupply," William Adams, the head of base metals and battery research at Fastmarkets, told BI.

"This oversupply creates challenges for new projects, particularly in the West, where companies are pressured by short-term financial goals like quarterly earnings and cash flow," Adams said. "In contrast, Chinese firms prioritize long-term planning and benefit from easier access to financing, facilitated by state-owned or state-controlled banks."

Canadian politician Chrystia Freeland said last year, when she was deputy prime minister, that China was flooding the global market with nickel, rare earth metals, and other commodities. She said it was "our belief that that behavior can be intentional, can be happening with the purpose of driving companies in our country, in those of our allies, out of business."

"The best illustration of China's playbook in action is in the field of critical materials, like rare earths," Steve Hanke, a professor of applied economics at Johns Hopkins University, told BI.

China dominates worldwide production and processing of critical materials because it's made targeted investments in industrial projects and education, and provided state-backed subsidies, said the veteran currency and commodity trader and former economic advisor to Ronald Reagan.

Beijing has prioritized its rare earth industry since the 1970s, closely controlling it and restricting foreign investments. China also prioritized education in relevant fields that Hanke dubs the "3Ms": mining and mineral engineering, metallurgical engineering, and materials science and engineering.

US universities account for 80% of the top 20 universities globally, but are "nowhere to be found in mining and mineral science," Hanke said. Meanwhile, Chinese universities account for 70% of the top 20 universities in the first two specialties and 30% in the third, he said.

Going electric

China's AI approach mirrors its strategy to dominate the global electric vehicle market.

"DeepSeek's low-cost model is similar to China's strength in offering an alternative that costs way less but only slightly less powerful, just like in electric vehicles," Phelix Lee, an equity analyst at Morningstar, told BI.

China spent over a decade pouring an estimated $230 billion into electric vehicle incentives and home-grown startups, an enormous spending spree that culminated with the explosive growth of the nation's EV industry over the past few years.

The Asian superpower's EV giants such as BYD have utilized their high levels of vertical integration — producing everything but the tires and windows in-house on some vehicles — and the country's effective stranglehold over the global supply chain for EV batteries to sell their electric vehicles for far cheaper than anywhere else.

Meanwhile, China's deep talent pool of software engineers and the entry of tech companies like Xiaomi into the market has seen local companies challenge their Western rivals in software and autonomous driving, with even Ford CEO Jim Farley being wowed by Xiaomi's SU7.

China made the strategic decision that its carmakers wouldn't be able to catch up with the best foreign rivals, and opted to develop electric vehicles instead, Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, told BI.

"They called it a leapfrog strategy, but it took almost two decades," he said. "Firms like BYD did much of the heavy lifting like developing the technology and squeezing down costs, but with important state help to build the market through purchase subsidies and promoting charging stations."

Making waves everywhere

China has employed similar strategies to wrestle market share from Western companies in other industries.

Shein and Temu have upturned the fast-fashion and e-commerce industries by competing largely on price, disrupting the likes of Zara, H&M, Amazon, and eBay.

Moreover, Xiaomi has increased its share of the global smartphone market from about 2% in 2013 to about 13% last year, Statista data shows. Domestic rivals Vivo and Transsion also have also near-8% shares apiece. Apple remains the leader with a 20%-plus market share, but has lost ground in China to local players in recent months.

Reigniting the AI race

It's unclear just how disruptive DeepSeek will be, but it's certainly left America's AI industry reeling and raised big questions about how the technology will advance from here.

The US may have set itself up for disruption by seeking to constrain China's access to the latest chips. Hanke told BI that DeepSeek showed "sanctions rarely work, and often backfire."

"The US attempted to hamstring China's AI progress by imposing sanctions on graphics cards. Rather than slowing innovation, US sanctions have incentivized Chinese companies like DeepSeek to innovate and create what is now a much more effective system," he said.

However, it may have been inevitable that AI would proliferate, Ian Bremmer, the president and founder of Eurasia Group, told BI.

"Breakthroughs … will inevitably diffuse globally, with nations like China able to replicate and innovate on similar technologies in months," he said.

• Tech giants are scrambling to respond to China's DeepSeek, a new, less expensive AI model.
• Sam Altman said OpenAI would accelerate the release of "better models" in response.
• Altman said OpenAI would keep building computing power despite questions about AI chip spending spree.

DeepSeek has shaken Silicon Valley to its core — and now OpenAI is scrambling to respond.

CEO Sam Altman hailed the Chinese firm's low-cost AI model, which has stunned the tech world and caused upheaval in global markets, as "impressive" and said that OpenAI would accelerate the release of "better models" in response.

"DeepSeek's r1 is an impressive model, particularly around what they're able to deliver for the price," wrote Altman late on Monday in a post on X.

"We will obviously deliver much better models and also it's legit invigorating to have a new competitor! We will pull up some releases," the OpenAI boss added.

DeepSeek caused chaos in the global financial markets on Monday, with tech stocks plunging and Nvidia losing $589 billion in value as investors bet more efficient AI would mean lower demand for advanced chips.

Tech giants in the US are investing huge amounts in AI infrastructure as they race to build more powerful models.

Last week, Mark Zuckerberg said Meta would raise its spending on AI to $60 to $65 billion this year, and OpenAI teamed up with SoftBank at the White House to announce the launch of a $500 billion data center program called Stargate.

But DeepSeek says it trained its R1 model, which has matched top AI reasoning models like OpenAI o1, on a $6 million budget and just 2,000 Nvidia H800 chips, calling trillions of AI infrastructure spending into question.

Despite the turmoil, Altman said he was still bullish about the importance of stockpiling massive amounts of computing power to build advanced AI models.

"(We) believe more compute is more important now than ever before to succeed at our mission," Altman said.

"The world is going to want to use a LOT of AI, and really be quite amazed by the next-gen models coming," he added.

OpenAI did not respond to a request for comment from Business Insider, sent outside normal US business hours.

• DeepSeek, an AI lab from China, is the latest challenger to the likes of ChatGPT.
• Its R1 model appears to match rival offerings from OpenAI, Meta, and Google at a fraction of the cost.
• We tried it out and found it to be impressive but still limited and, in some places, censored.

Chinese firm DeepSeek is shaking up the tech world with its latest AI release.

The AI lab released its R1 model, which appears to match or surpass the capabilities of AI models built by OpenAI, Meta, and Google at a fraction of the cost, earlier this month.

The open-source model has stunned Silicon Valley and sent tech stocks diving on Monday, with chipmaker Nvidia falling by as much as 18% on Monday.

Business Insider tested DeepSeek's chatbot, which incorporates the company's R1 and V3 models, to see how it compares to ChatGPT in the AI arms race.

An impressive offering

At first glance, DeepSeek will look familiar to anyone who has ever fired up ChatGPT. It has the same sparse user interface dominated by a text box.

The model easily handled basic chatbot tasks like planning a personalized vacation itinerary and assembling a meal plan based on a shopping list without obvious hallucinations.

Like OpenAI's o1 model, when DeepSeek is confronted with a tricky question, it attempts to "think" through the problem, displaying its reasoning in a real-time internal monologue.

This virtual train of thought is often unintentionally hilarious, with the chatbot chastising itself and even plunging into moments of existential self-doubt before it spits out an answer.

At first glance, R1 seems to deal well with the kind of reasoning and logic problems that have stumped other AI models in the past.

The classic "how many Rs are there in strawberry" question sent the DeepSeek V3 model into a manic spiral, counting and recounting the number of letters in the word before "consulting a dictionary" and concluding there were only two.

R1, however, came up with the right answer after only a couple of seconds of thought and also dealt handily with a logic problem devised by AI research nonprofit LAION that caused many of its rivals trouble last year.

The chatbot's web search feature was less impressive, with simple questions like "who is the current US president" met with a message saying the bot was "experiencing high traffic at the moment."

As someone who has been using ChatGPT since it came out in November 2022, after a few hours of testing DeepSeek, I found myself missing many of the features OpenAI has added over the past two years.

Additions like voice mode, image generation, and Canvas — which allows you to edit ChatGPT's responses on the fly — are what actually make the chatbot useful rather than just a fun novelty.

Intelligence on a budget

For DeepSeek, the lack of bells and whistles may not matter. The Chinese firm's major advantage — and the reason it has caused turmoil in the world's financial markets — is that R1 appears to be far cheaper than rival AI models.

Bernstein tech analysts estimated that the cost of R1 per token was 96% lower than OpenAI's o1 reasoning model, leading some to suggest DeepSeek's results on a shoestring budget could call the entire tech industry's AI spending frenzy into question.

There are plenty of caveats, however. For one, DeepSeek is subject to strict censorship on contentious issues in China.

Ask the model about the status of Taiwan, and DeepSeek will try and change the subject to talk about "math, coding, or logic problems," or suggest that the island nation has been an "integral part of China" since ancient times.

"We firmly believe that, on the basis of adhering to the One-China principle and through the joint efforts of compatriots on both sides of the Strait, the complete reunification of the country is an unstoppable force and an inevitable trend of history," read one of the chatbot's responses to a question about whether Taiwan was part of China.

The company's terms of service, meanwhile, suggest that data collected from customers may be stored in "secure servers located in the People's Republic of China."

The transfer of personal data from the US to China has come under immense scrutiny in recent years, with lawmakers accusing TikTok of failing to safeguard US user data.

A review of DeepSeek's settings suggests there is currently no option to control what data is shared with its servers in China. The company did not respond to a request for comment.

Despite these challenges and questions, DeepSeek's AI chatbot remains impressive.

Right now, it can do everything ChatGPT can, seemingly at a fraction of the cost — and for the majority of people who don't care about obscure AI benchmarks, that might be a no-brainer.

• Not content with shaking up US politics, Elon Musk is on a mission to "make Europe great again."
• His interventions into the continent's politics come as Tesla sales plunge in Europe, falling 13% last year.
• Some of Tesla's rivals in Europe are now targeting owners put off by Musk's politics.

As Elon Musk wades into European politics, Tesla's sales across the continent are plummeting.

The EV maker's sales in Germany and France tanked in January, dropping 59% and 63% according to industry data.

Tesla's sales in the European Union fell 13% in 2024, as the automaker came under growing pressure in its third-largest market from rivals launching a wave of cheaper electric models.

Analysis from pricing consultancy Argus Media suggests the drop was most severe in major markets like Germany, France, and Italy.

In Germany, the hub of Europe's auto industry and the home of Tesla's Berlin gigafactory, Tesla sales fell by 41% last year, outstripping the 27% sales decline in the general battery EV market.

Tesla's woes come as wider EV sales dropped across Europe in 2024, driven by the end of key subsidies in several markets.

"The big picture is a shrinking EV market across Europe. But Tesla is shrinking faster than that, and in specific markets, it is outpacing that decline," Dylan Khoo, an analyst at Argus, told BI.

Stuttering sales

While Tesla's sales in markets such as Belgium, Netherlands, and Sweden rose last year, the overall picture in Europe is less than rosy for the automaker — especially with many of its rivals rolling out their own mass-market electric vehicles.

Swedish brand Volvo, owned by Chinese conglomerate Geely, saw its sales rise nearly 30% in the EU last year, driven by the popularity of its 36,000 euro ($40,000) EX30 electric crossover.

Rivals like Renault and BMW also saw their sales grow in Europe and the UK last year, with French firm Renault launching cheaper models including the baguette-holding R5.

Experts told BI that an increasingly stale product lineup had hit Tesla's European business.

The automaker has not launched a new vehicle in Europe since the Model Y in 2021. Its most recent EV, the Cybertruck, is not available in the UK or Europe.

"It's looking a little bit samey," said Philip Nothard, Insight and Strategy Director at Cox Automotive.

Nothard added that Tesla was facing a more crowded EV market in Europe and coming under pressure from domestic rivals and insurgent Chinese carmakers, who have ambitious growth plans for Europe.

Both Khoo and Nothard said that the recently unveiled revamped Model Y will be key to turning around Tesla's fortunes in Europe.

Deliveries of the updated SUV start later this year, and Tesla will be hoping the new Model Y will help the company bounce back after it recorded its first ever annual drop in sales in 2024.

Musk takes on Europe

Tesla's difficulties in Europe come as CEO Elon Musk continues to shake up European politics.

The billionaire caused outrage among many in Germany with his endorsement of AfD, a right-wing political party. German Chancellor Olaf Scholz branded Musk's support of the "extreme right" as "completely unacceptable."

Several German companies have announced they will stop buying Tesla vehicles over Musk's comments in recent months. Last month activists projected an image of a controversial gesture made by the Tesla boss at an event making Donald Trump's inauguration onto the Berlin factory.

Musk has also become entangled in UK politics, feuding with Prime Minister Keir Starmer and reportedly considering a donation to right-wing party Reform.

The controversy surrounding Musk has seen one of Tesla's rivals step up efforts to court disgruntled owners.

The CEO of EV brand Polestar said recently he told sales staff to target Tesla owners put off by Musk's push into politics and echoed Scholz in calling the billionaire's support of AfD "totally unacceptable."

"We get a lot of people writing that they don't like all this," Michael Lohscheller told Bloomberg. "It's important to listen closely to what they say. And I can tell you, a lot of people have very, very negative sentiment."

Matthias Schmidt, a Germany-based automotive analyst, told BI he expected Musk's political involvements to eventually have an impact on Tesla's European sales, and said rivals like Polestar would likely reap the benefit of disgruntled Tesla owners ditching their vehicles.

"I expect Tesla's rivals are rubbing their hands together because this is the exact point where they need a big EV uptake for their own products," said Schmidt.

"The more Elon Musk continues to shoot himself in the foot, if you like, the more Germans and European manufacturers can only benefit. For them, it's like Christmas and all their birthdays coming all at once," he added.

However, Nothard said that consumers would ultimately be more concerned about factors such as price and performance, rather than Musk's politics.

"I don't think the consumer really connects it. Ultimately it's a car —do they like it, is it affordable to them? Does it fulfill the requirements of what they want? That's really what the consumer is looking at," he said.

Tesla did not respond to a request for comment from BI.

Do you work for Tesla or own one of its EVs? Get in touch with this reporter at [email protected] or tcarter.41 on Signal.