Tesla is facing significant challenges in China, its most crucial market outside the United States, where it has historically held a dominant position.
In October, 32-year-old Liu Jie opted for a sports sedan from Xiaomi, a technology company known for consumer electronics, over Tesla after test-driving several models. She remarked, “Xiaomi is more fashionable,” indicating a shift in consumer preferences away from the once-popular Tesla, which she perceives as “a little bit normal.”
Despite still being regarded as a leading brand and with CEO Elon Musk enjoying admiration in China, Tesla faces fierce competition from local manufacturers. Chinese consumers are increasingly attracted to domestic brands that provide more efficient vehicles with advanced technology, often at significantly lower prices.
BYD, Tesla’s primary competitor, recorded sales of 481,318 cars in the first two months of this year, marking a year-over-year increase of over 75%. In contrast, Tesla sold 60,480 vehicles during the same period, representing a 14% decline.
The decline in Tesla's sales is exacerbated by criticism of Musk's previous political affiliations and the subsequent loss of about 25% of the company's market value in the past month, as investor confidence wavers.
BYD has consistently outperformed Tesla, selling approximately one million more vehicles each year for the past three years, largely due to its lower pricing and favorable government policies that often direct business towards local firms.
The current economic climate, characterized by a property crisis and a slowdown in consumer spending, has dampened overall vehicle sales. To stimulate the market, the government has introduced and recently increased trade-in subsidies for older vehicles, benefiting both domestic manufacturers and Tesla.
Although a luxury car market remains, with buyers like Liu still willing to invest in higher-priced options, many are drawn to the advanced technology offered by local brands, an area where Tesla has struggled due to regulatory delays in releasing comparable features.
Sales of all vehicle types are declining in China, making it increasingly difficult for dealerships to move inventory. Chen Jiaming, a salesperson at an FAW-Volkswagen dealership, noted that the market has become saturated compared to two years ago.
Tesla's recent approval to offer a version of its Autopilot technology to Chinese customers represents a step forward, though it remains less advanced than its U.S. counterpart, requiring an additional payment for the necessary software update.
Younger consumers are showing a preference for Chinese brands, as noted by Xia Lifang from the Arcfox dealership. While Tesla and BYD remain highly trusted, individuals born in the 1990s and 2000s are more willing to explore newer brands, with Xia asserting, “Our car looks better than Tesla,” and highlighting the cost advantages of local alternatives.