Tesla (NASDAQ:TSLA) stock has been a turbulent ride for investors this year, with the stock down close to 12% year to date. Though there’s a lot to look forward to from the AI-leveraging electric vehicle (EV) pioneer, with its Robotaxi Event now just over a month away, questions linger as to whether Tesla can continue to be an EV leader by the conclusion of the next decade as Chinese rivals really start putting their foot on the gas.

If Chinese EV competitors continue making strides on pricing, there’s a serious risk that Tesla’s sales could drag for many years down the road. After all, Tesla vehicles are not cheap. And after battling the inflation-driven cost-of-living crisis, I’m not sure that consumers are ready to treat themselves to a fancy new Tesla Cybertruck—not until prices come down further.

Key Points About This Article

• Chinese EV makers pose a competitive threat with their incredibly low prices.
• Tesla’s high-status brand and technological edge could be enough to fend them off.
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Tesla Price Cuts are One Way It Can Fight Back Against Rivals

Should Tesla get more aggressive with its global price cuts to spark demand and be more competitive with rivals, the margin hit could have the potential to be off-putting to investors and analysts. Not to mention that such discounts could impact Tesla’s luxury brand status. In any case, I don’t think continued price cuts are enough to erode the great deal of brand affinity built over the years.

At the end of the day, Tesla is one of the pioneers of the industry. The man behind the brand, Elon Musk, is often the main selling point for prospective customers looking to shift gears by going fully electric. The big question is whether advancements in newer, more affordable Chinese EVs could take a growing bite out of Tesla’s market share.

As it stands, some of the leading Chinese EV brands — think BYD Co. (OTCMKTS:BYDDF), a firm that Warren Buffett’s right-hand man Charlie Munger owned and praised — aren’t as well-known in the U.S. market and other parts of the globe. BYD may be a smooth operator with exceptionally talented managers and various competitive advantages. Still, it needs to spend aggressively on marketing campaigns like most other auto companies do if it seeks a brand that’s as powerful as Tesla.

Of course, BYD can build brand affinity by just making great, reliable, long-lasting cars at competitive prices. But such a reputation takes years, even decades, to build. And the Chinese autos don’t seem willing to wait to grab a bigger slice of that booming EV market.

Tesla’s Brand Power is Second to None

When it comes to buying a new car, trust in a brand is vital. And on the luxury front, the Chinese EV brands just don’t stack up quite yet, even if some of the newer Chinese EV models offer intriguing innovations at a more reasonable price. In a way, Tesla’s brand is the main source of its economic moat as the EV scene gets a bit more crowded.

Even if the coming Robotaxi day is lacking, I’d argue that Tesla doesn’t need to be rolling at full speed on innovation to fend off fast-moving Chinese rivals. Though high-tech features (think AI and self-driving) and lower prices are essential factors in gaining market share, I still think brand power matters, perhaps more than ever, as Chinese and U.S. EV makers duke it out.

In any case, I think competitive threats, whether from China or elsewhere, are priced into the stock here. Tesla stock has already lost more than 46% of its value from its 2021 peak. And with potentially muted expectations ahead of the robotaxi event (a Waymo-killer seems highly unlikely), the bar may be low enough to set the stage for a magnificent multi-year recovery.

As we approach Halloween 2024, Tesla will have a chance to update us all on its self-driving progress. I think a base-case scenario would see Musk’s firm keep up stride-for-stride with Alphabet (NASDAQ:GOOG) Waymo. However, there’s always a chance that Tesla can show signs it’s outpacing Waymo and others on full self-driving tech. If that happens, perhaps Tesla’s stock could command a greater premium than its rivals, many of whom may lag Tesla by a wide margin on autonomy.

The Bottom Line on TSLA Stock

A powerful brand, up-to-speed self-driving tech, battery innovations, and hard-working autonomous robots can all help Tesla stay miles ahead of its Chinese EV peers, even as the EV price continues coming in.

Sure, Chinese EV rivals may be able to take some share over the medium term as they beckon cost-conscious customers. However, once the bull’s back in the driver’s seat, look for Tesla stock to leave the recharge station with its foot on the pedal.

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