U.S. electric car maker Tesla (TSLA.O) said its China-made EV sales fell 11.5% in January from last year, based on figures from the China Passenger Car Association (CPCA). It sold 63,238 units, down 32.6% from December too.
Tesla’s Model 3 and Model Y, produced at its Shanghai Gigafactory, have been under pressure from local players such as BYD and Xiaomi, which are rapidly increasing their EV presence. Tesla has launched a new version of the Model Y SUV in China in response to the competition, but it is uncertain whether the upgrade will assist in recouping market share.
BYD and Xiaomi Surpass Tesla in China’s EV Market
Tesla’s sales decline is happening while BYD (002594.SZ) maintains its leadership in China’s EV and plug-in hybrid market. BYD sold 296,446 passenger vehicles in January, an impressive 47.5% year-over-year gain. Sales were off 41.8% from December, however, primarily due to seasonal factors related to the Chinese Lunar New Year.
Xiaomi (1810.HK), meanwhile, has become a serious contender. Beijing’s smartphone behemoth entered the EV market with its SU7 electric sedan, outselling Tesla’s Model 3 in December. Xiaomi will release its first SUV later this summer, directly competing with Tesla’s top-selling Model Y.
Production Slowdown Amid Factory Upgrades and Holiday Disruptions
Tesla has partially halted the production of its Model Y lines in Shanghai for nearly three weeks as part of upgrading the factories, according to Bloomberg News. Production and consumer activity in the auto industry also got disrupted during the Chinese Lunar New Year holiday, which began earlier this year in late January.
As its sales decline, Tesla introduces discounts and incentives to sell cars. To attract buyers, Tesla has deepened discounts and financing incentives for Chinese consumers. Some of them include:
- Outstanding loans with a discount on older Model Y units at 10,000 yuan ($1,372).
- Zero-interest financing for up to five years is offered on the select Model 3 and Model Y models
- All Model 3 cars sold in China can receive an 8,000 yuan ($1,098) insurance subsidy
The aggressive pricing strategies by Tesla have cut into its margins, and during the fourth quarter of 2024, it reported a squeeze in earnings.
Full Self-Driving (FSD) Development in China.
Tesla will bring its FSD to China this year, said Musk. Tesla will gain further advantage in the world’s biggest EV market through the launch. Advanced AI features have become one of the significant selling points in China, with most consumers ready to pay for more.
Market Outlook
Tesla is seeing more competition from China as BYD, Xiaomi, and others further solidify their position in the EV space. While it leads the pack of electric vehicle producers worldwide, the future in China depends much on its Model Y success, new pricing models, and finally FSD deployment.
As Chinese EV manufacturers begin to significantly increase production and innovation, 2025 promises to be an instrumental year in defining the electric vehicle industry in China.
