Tesla sales in China drop 7 months straight

• Tesla China sales decline extends to seven consecutive months in 2025, with market share plummeting from 16% in 2020 to just 4.4% in August
• Domestic rivals like Leapmotor, Xpeng, and Xiaomi capture buyers with vehicles priced 40-50% lower than Tesla models while offering comparable smart features

The signs are unmistakable: Tesla is gradually losing its appeal in China’s premium electric vehicle (EV) segment. Once the undisputed leader commanding 16% of the market in 2020, the American automaker now struggles to maintain relevance as domestic competitors rapidly gain ground with cheaper, feature-rich alternatives.

The decline in sales of Tesla in China has extended to seven consecutive months in 2025, with August deliveries falling 9.9% year-on-year (YoY) to 57,152 Shanghai-made Model 3 and Model Y vehicles, according to the China Passenger Car Association (CPCA). While September showed marginal improvement with sales reaching 71,525 units—the second-highest monthly figure this year—the year-on-year decline of 0.93% still marks another month of contraction.

What does market share erosion tell?

The trajectory of Tesla’s market position in China reveals a dramatic reversal of fortune. When the Shanghai Gigafactory began producing Model 3 vehicles for mainland customers in 2020, Tesla commanded a formidable 16% share of the Chinese EV market. That dominance has steadily eroded, slumping to 6.9% last year, according to the South China Morning Post.

In August 2025, Tesla’s share of China’s total EV deliveries stood at just 4.4%, even as the overall market climbed 23% to 1.29 million units, CPCA data showed. By September, this improved slightly to 5.52% of China’s new energy vehicle (NEV) market and 8.66% of the battery electric vehicle (BEV) market—still a far cry from its former dominance.

“Tesla is unlikely to regain its glory in this market since Chinese rivals are growing fast and their diverse product portfolios will continue to siphon off buying interest from Model 3 and Model Y vehicles,” David Zhang, secretary general of the International Intelligent Vehicle Engineering Association, told SCMP.

The price war intensifies

Chinese EV manufacturers have fundamentally altered the competitive landscape by offering sophisticated vehicles at significantly lower price points. Leapmotor, backed by Fiat owner Stellantis, exemplifies this trend. The Hangzhou-based company broke its sales record for a fourth consecutive month in August by delivering 57,066 units, up 13.8% from July.

In late July, Leapmotor priced its new B01 sedan at 89,800 yuan (US$12,595)—just 40% of the Model 3’s price of 235,500 yuan. These vehicles come equipped with preliminary self-driving systems and digital cockpits, features that once differentiated Tesla from competitors.

Guangzhou-based Xpeng delivered 37,709 vehicles in August, up 2.7% from July, setting a new record for a second consecutive month. The basic edition of its Mona M03, a midsize fully electric sedan launched in August 2024, carries a price tag of 119,800 yuan—approximately half the cost of a Model 3.

A new challenger emerges

Perhaps most remarkable is the rise of Xiaomi, a smartphone maker turned EV startup. Since its first model, the SU7 fully electric sedan, debuted in March 2024, the Beijing-based company has become one of the fastest-growing carmakers on the mainland.

In June 2025, Xiaomi received 200,000 pre-orders for its YU7 sport-utility vehicle in just three minutes after bookings opened. “Such frenzy over a new EV was unprecedented in China, where monthly sales of 10,000 units for a single model is typically considered a success,” the SCMP reported. By September, Xiaomi’s deliveries exceeded 30,000 units.

Tesla’s response strategy

Tesla has not remained passive in the face of mounting competition. The company has implemented price cuts, offered interest-free loans, and launched new model variants in efforts to woo consumers—yet these measures have failed to reverse the Tesla China sales decline.

Earlier in September, Tesla reduced the price of its new, longer-range Model 3 by 4%, or 10,000 yuan, to 259,500 yuan—just before deliveries were set to begin. The latest variant boasts a driving range of 830km. Additionally, Tesla offered buyers a subsidy of 8,000 yuan for insurance plus a five-year, interest-free loan amounting to 20,000 yuan in savings.

The company also began delivering its six-seat Model Y L later in September, priced at 339,000 yuan—approximately 30% higher than the basic edition. Equipped with LG Energy Solution’s high-performance battery, this represented the most substantial update of Tesla’s Chinese-made models to date.

Despite these efforts, the CPCA data shows that “Tesla’s losing streak has extended to six months in a row, despite its efforts to woo consumers away from rivals like Xpeng and Xiaomi with price cuts, interest-free loans and new model launches,” SCMP’s report reads.

Shifting consumer preferences

Consumer sentiment research underscores the challenge Tesla faces. A UBS survey conducted in May revealed that the number of EV buyers in China who picked Tesla as their top choice fell to 14% in 2024, down from 18% the previous year and a 30% peak in 2020.

“Tesla cars are still believed to be superior to their Chinese rivals in terms of quality, reliability and performance,” said Tian Maowei, a sales manager at Yiyou Auto Service in Shanghai. “But young consumers would opt for cheaper Chinese models because of their lower prices.”

Zhang from the International Intelligent Vehicle Engineering Association added that “those Chinese-developed smart EVs are cheaper and more stylish, which proves to be attractive to many young consumers.”

The quarterly picture

Year-to-date through September, Tesla’s retail sales in China totalled 432,704 units, down 5.97% year-on-year, according to CnEVPost data. In the third quarter alone, sales reached 169,294 vehicles, marking a 6.92% year-on-year decline—Tesla’s second consecutive quarterly sales drop in China, following an 11.72% year-on-year decline in the second quarter.

In the third quarter, Tesla’s China market sales contributed 34.06% of its global deliveries of 497,099 units, higher than the 33.53% in the second quarter, according to data compiled by CnEVPost. This demonstrates that while China remains critical to Tesla’s global operations, the company’s position in this key market continues to weaken.

Export performance offers little consolation

Tesla’s Shanghai Gigafactory, its largest production base worldwide, currently assembles only Model 3 and Model Y vehicles. The facility exported 19,287 vehicles in September, up 19.64% year-on-year but down 25.93% from August.

Model Y wholesale sales reached 59,907 units in September, up 17.12% year-on-year and up 1.73% month-on-month. Model 3 wholesale sales totalled 30,905 units in September, down 16.85% year-on-year but up 27.16% month-on-month, according to CnEVPost.

The verdict

The fundamental question facing Tesla is whether premium branding and perceived quality advantages can justify significant price premiums in a market where domestic manufacturers have rapidly closed the technology gap while maintaining aggressive pricing strategies.

As Chinese EV makers continue expanding their diverse product portfolios with intelligent features once exclusive to Tesla, the American automaker faces an increasingly difficult path to reclaiming its former market dominance in China.

The answer to whether Tesla is gradually losing its appeal in China’s premium EV segment appears increasingly clear: yes, and the trend shows little sign of reversing without dramatic strategic changes.

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