Musk said that Chinese firms will "destroy" their global competitors unless action is taken by governments.
The comments highlight the pressure the US electric vehicle market leader is facing from companies like BYD as it vies to expand around the world.
Musk's comments come after BYD, in which billionaire investor Warren Buffett is a shareholder, overtook Tesla as the world's best-selling electric vehicle company last quarter with cheaper models and a more diverse product range.
In a call with analysts after the company announced its fourth-quarter performance, Musk said Chinese car companies are the "most competitive" and "will have significant success outside of China, depending on what kind of tariffs or trade barriers are created."
Musk said, "They are extremely good. If no trade barriers are set up, they will virtually wipe out most of the other car companies in the world," Musk said.
Asked what they thought of Musk's comments, a spokesperson for China's foreign ministry said at its daily press conference that it was not aware of the remarks but advocated "maintaining a fair, equitable and open business environment."
Over the past year, Tesla's profit margin has shrunk as it slashed prices to woo consumers hit by high borrowing costs, which has worried investors.
On Wednesday, Musk warned that Tesla had reached its "natural limit of cost reduction" with its current product lineup.
Reuters wrote on Tuesday that Tesla plans to start producing a cheaper, mass-market compact crossover codenamed "Redwood" in mid-2025 to compete with cheaper rivals.
Musk confirmed that Tesla plans to start production of the next generation of electric cars at its Texas factory in the second half of 2025.