Elon Musk will confront a critical challenge during Tesla’s Investor Day on 1 March: convincing investors that even though rivals are catching up, the electric vehicle pioneer can make another leap forward to widen its lead.

Tesla was the number-one EV maker worldwide in 2022, but China’s BYD and others are closing the gap fast, according to an analysis of global and regional EV sales data provided by EV-volumes.com.

In fact, BYD passed Tesla in EV sales last year in the Asia-Pacific region, while Volkswagen Group has been the EV leader in Europe since 2020.

While Tesla narrowed VW’s lead in Europe, the US car maker surrendered ground in Asia-Pacific as well as its home market as the competition hotted up.

The most significant challenges to Tesla are coming from established car makers and a group of Chinese EV manufacturers. Several US EV start-ups that hoped to ride Tesla’s coattails are struggling, including luxury EV maker Lucid, whose shares plunged 16% on Thursday after disappointing sales and financial results.

Over the next two years, rivals including General Motors, Ford, Mercedes-Benz, Hyundai and VW will unleash scores of new electric vehicles, from a Chevrolet priced below US$30 000 to luxury sedans and SUVs that top $100 000.

On Wednesday, Mercedes used Silicon Valley as the backdrop for a lengthy presentation on how Mercedes models of the near future will immerse their owners in rich streams of entertainment and productivity content, delivered through “hyperscreens” that stretch across the dashboard and make the rectangular screens in Teslas look quaint. Executives also emphasised that only Mercedes has an advanced, level-3, partially automated driving system approved for use in Germany, with approval pending in California.

Cut prices

In China, Tesla has had to cut prices on its best-selling models under growing pressure from domestic Chinese manufacturers including BYD, Geely Automobile’s Zeekr brand and Nio. China’s EV makers could get another boost if Chinese battery maker CATL follows through on plans to heavily discount batteries used in their vehicles.

Musk has said he will use the 1 March event to outline his “Master Plan Part 3” for Tesla.

In the nearly seven years since Musk published his “Master Plan Part Deux” in July 2016, Tesla pulled ahead of established car makers and EV start-ups in most important areas of electric vehicle design, digital features and manufacturing.

Tesla’s vehicles offered features, such as the ability to navigate into a parking space or make rude sounds, that other vehicles lacked.

Tesla’s then-novel vertically integrated battery and vehicle production machine helped achieve higher profit margins than most established car makers — even as bigger rivals lost money on their EVs.

Fast-forward to today, and Tesla’s “Full Self Driving Beta” automated driving is still classified by the company and federal regulators as a “level-2” driver assistance system that requires the human motorist to be ready to take control at all times. Such systems are common in the industry.

Tesla earlier this month was compelled by federal regulators to revise its FSD software under a recall order.

Tesla has established a wide lead over its rivals in manufacturing technology — an area where it was struggling when Musk put forward the last instalment of his “Master Plan”.

Now, rivals are copying the company’s production technology, buying some of the same equipment Tesla uses. IDRA, the Italian company that builds huge presses to form large one-piece castings that are the building blocks of Tesla vehicles, said it is now getting orders from other manufacturers.