Tesla’s once-dominant position in China’s electric vehicle (EV) market is showing signs of weakening. Recent data reveals a concerning trend for the American automaker, with sales declining for five consecutive months. This shift in market dynamics raises questions about Tesla’s future prospects in the world’s largest EV arena.
February proved particularly challenging for Tesla, as shipments plummeted 49% year-on-year to a mere 30,688 vehicles. This marks the lowest monthly figure since July 2022, a period significantly impacted by Covid-related disruptions. While Tesla attributes part of this decline to production line retooling at its Shanghai factory for efficiency improvements and the relaunch of the Model Y, the downward trend predates these adjustments.
An analysis of market share among the top 12 automakers in China further illustrates Tesla’s waning influence. Currently ranked 11th, Tesla holds less than 5% of the market, a stark contrast to its previous standing. This decline is not unique to Tesla, as most international automakers are experiencing similar downward trends in the Chinese market.
In stark contrast to Tesla’s struggles, BYD Co., a Chinese automaker that ceased production of purely combustion engine vehicles in 2022, is experiencing remarkable growth. BYD’s market share is approaching 15%, fueled by impressive sales figures. In February, the company sold over 318,000 fully electric and hybrid passenger vehicles, representing a staggering 161% year-on-year increase. BYD also achieved record-breaking overseas sales, further solidifying its global presence.
BYD’s success is a key factor contributing to Tesla’s decline in China. While Tesla’s global sales are also facing challenges due to various factors, including CEO Elon Musk’s controversial political stances, the situation in China is largely attributed to a product lineup perceived as dated and lacking innovation compared to offerings from BYD and other competitors.
Tesla’s share of the domestic Chinese market has dwindled to 2.6%, its lowest point in 12 months. Analysts at Morgan Stanley predict a continued decline in Tesla’s China exposure, projecting a significant drop in revenue contribution from the region by 2030. While China accounted for 21% of Tesla’s total revenue in 2024, this figure is expected to plummet to approximately 6% to 7% by the end of the decade. This forecast underscores the challenges Tesla faces in maintaining its relevance in a rapidly evolving and increasingly competitive Chinese EV market. As BYD continues its upward trajectory and other domestic players innovate, Tesla needs to adapt its strategy to regain lost ground and secure its long-term future in China.
