It’s almost unthinkable, but Tesla, the company that comes to mind when most people think about electric vehicles, may have had its best days in China, the world’s biggest and most advanced EV market.
Elon Musk’s car maker has been backsliding in China for the past five consecutive months on a year-on-year basis, according to data from the country’s Passenger Car Association. Tesla’s shipments plunged 49% in February from a year earlier to just 30 688 vehicles, the lowest monthly figure since way back in July 2022, when it shipped just 28 217 EVs — and that was in the middle of Covid.
Tesla’s factory on the outskirts of Shanghai has had some of its production lines retooled for efficiency and to relaunch the popular Model Y, so it’s to be expected both that output dropped and will take some time to ramp back up. But even before that, the trend was heading in the wrong direction.
Look at BYD. The company, which stopped making cars powered entirely by internal combustion engines in March 2022, has a market share heading towards 15%. It sold more than 318 000 fully electric and hybrid passenger vehicles last month, up 161% year on year. The Shenzhen-based car maker also notched another record month for overseas sales, which hit 67 025 units.
Its success is a major reason why Tesla is losing.
While Tesla sales in other parts of the world are cratering as Musk wades deeper into politics many find unsavory — sales in Germany plunged 76% to only 1 429 cars last month, even as overall EV registrations jumped — in China, disappointing shipments have more to do with a narrow and dated line-up, particularly in the face of up-to-date and more exciting offerings from BYD and others.
Upped their game
Year-end data places Tesla’s share of domestic sales at 2.6%, the lowest in 12 months, according to figures compiled by the China Automotive Technology and Research Centre.
Both the Model Y and Model 3, the two vehicles Tesla makes in Shanghai, have only had their prices trimmed, rather than slashed, and buying one still costs around $33 500 on average.
BYD’s best-selling model this year in China, a sporty hatchback called the Song Plus, has had its sticker price reduced by between 8% and 18%, depending on the car’s specs. The most expensive Song Plus EV retails for around $21 000 — much cheaper than a Tesla.
Read: BYD throws down the gauntlet to Tesla
Another of BYD’s popular models, the Seagull, which has found around 82 435 buyers this year, comes in at an even more affordable $9 900, on average.
Chinese car makers have also significantly upped their game when it comes to localised software tailored to domestic driving conditions.
BYD said earlier this year that it’s taking advanced driver assistance to the masses by including its God’s Eye technology in even some of its cheapest cars. Now, features like lane keeping and adaptive cruise control will be for everyone, not only people who can afford mid- to high-end models.
Geely Automobile Holdings, China’s fourth-ranked car maker by market share, said last week that its AI-powered pilot system will be added to all of its brands, including Galaxy, Zeekr and Lynk. The G-Pilot technology will enable cars to navigate highways and self park.
Tesla isn’t standing still. Apart from its highly anticipated Model Y refresh — the sport utility vehicle now features a thin LED light running across its front end, reminiscent of the Cybertruck — Tesla last month enabled driver-assistance capabilities in China similar to those marketed as Full Self-Driving, or FSD, in the US. The software will be switched on for customers who’ve paid C¥64 000 yuan ($8 800). Then again, that’s almost as much as what it would cost to buy an entire one of BYD’s cars.
For Tesla, a recalibration of its pricing strategies, both for its driver-assistance functions and the vehicles themselves, is paramount.
Offering tiered FSD packages, or a subscription option like what Tesla has in the US, could broaden the appeal of its EVs. Chinese consumers place a lot of importance on intelligent software features in cars. That’s something Tesla could capitalise on as Musk’s pulling power wanes among some consumers.
Tesla could also look to integrate more locally sourced components and leverage China’s robust supply chain so that it’s not only building cars powered by electricity, but also by technology.
Read: Tesla sales are still crashing in Europe
BYD understands those domestic market dynamics well. The key for the company will be whether it can replicate its success in big car markets outside of China, even in the face of tariffs. It will take time and substantial investment to establish its brand abroad. — (c) 2025 Bloomberg LP
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