"Go right to the home territory of your competitor and make sure you dominate there," the general partner of Foundation Capital said on "Squawk Alley." "He's not going to Detroit. He's going to Shanghai."
The definitive work of Sun Tzu, believed to be a Chinese military leader who lived about 2,500 years ago, has informed warfare strategists through the ages on how to gain battlefield advantages. Modern-day business and sports figures also have drawn on the book's tactics and philosophies.
The strategy by Musk, Tesla's CEO, is particularly wise, Holland said, because he believes Tesla's largest competition in the electric-vehicle category will come from Chinese companies.
The No. 2 selling EV was from a different Chinese company, Beijing-based BAIC Group.
Holland said Byton has "hundreds of developers" working in Santa Clara, California, as the company seeks to develop vehicles it views as comparable to Tesla. He said Byton also has a "very large' factory in China, which is the world's biggest vehicle market.
Holland's comments Tuesday come as the first Tesla Model 3 cars manufactured at the company's Shanghai factory were delivered to Chinese consumers.
Built in 10 months, the plant is the company's first outside the U.S. and is considered critical to Tesla meeting rising demand in China for its vehicles.