Tesla's Struggles in China: EV Market Share Hits 51%, A Tipping Point

Tesla is struggling with sales demand in China, a key market for electric vehicles, as increased competition from other companies hurts its market share. China's electric vehicle market share has reached 51% year-to-date, with each of the last five months having a share above 50%. Tesla's decline in China comes at a bad time, as it misses out on the growth in the country.

Tesla Inc. (NASDAQ:TSLA) is facing significant challenges in China, a key market for electric vehicles (EVs). The company's sales in the region have been declining, with increased competition from local and international rivals. This decline comes at a critical time as China's EV market share has reached 51% year-to-date, with each of the last five months having a share above 50%.

In July 2025, Tesla's new car registrations in Europe dropped by 40% year-on-year, according to the European Automobile Manufacturers Association (ACEA) [1]. Meanwhile, Chinese rival BYD saw a monthly surge in registrations, up 225% annually. This trend indicates that Tesla is losing market share to competitors in Europe and China.

The decline in Tesla's sales in China is particularly notable. According to Yahoo Finance, Tesla's EV market share in China has dropped to 7.6% in 2025, down from 15% during the height of the Covid pandemic in 2020 [2]. This decline is attributed to increased competition from local brands like BYD, Nio, and Xiaomi, which are launching models aggressively and ramping up their push into Europe.

One of the primary issues for Tesla in China is the competition from Xiaomi, a smartphone company that has ventured into the EV market. The Xiaomi YU7, a competitor to the Tesla Model Y, has seen strong sales growth since its launch. By the end of 2025, the YU7 could outsell the Model Y monthly, according to a report by Electrek [3]. The SU7, Xiaomi's first EV, has also been outselling the Tesla Model 3 this year.

Tesla's struggles in China come at a time when the overall EV market in the country is booming. The Chinese EV market share has been above 50% for each of the last five months, indicating strong demand for electric vehicles. Tesla's decline in China means it is missing out on this growth.

To address these challenges, Tesla is pivoting its AI strategy in China. The company is working closely with Chinese tech groups DeepSeek and ByteDance's Doubao to enhance its in-car tools. This move comes after Grok, Tesla's homegrown AI assistant, reportedly ran into legal troubles in China [2].

In conclusion, Tesla is facing significant competition and market share decline in China. The company's sales in the region have been declining, and it is missing out on the growth in the country's EV market. To address these challenges, Tesla is pivoting its AI strategy and working with local tech groups. However, the long-term impact of these changes remains to be seen.

References:
[1] https://www.cnbc.com/2025/08/28/tesla-europe-sales-plunge-40percent-chinese-ev-rival-byd-up-225percent.html
[2] https://finance.yahoo.com/news/elon-musk-drops-shock-u-230000807.html
[3] https://finance.yahoo.com/news/tesla-model-y-trouble-china-193101000.html