TESLA’S CHINA SLOWDOWN: LOCAL EV MAKERS TAKE THE LEAD

Photo by Mario Roberto Durán

Tesla’s Shanghai plant, its largest production base worldwide, delivered 67,886 Model 3 and Model Y vehicles in July. This marked an 8.4 percent decline compared with the same period last year and a 5.2 percent drop from June, according to data from the China Passenger Car Association (CPCA).

From January to July, deliveries totaled 432,360 units, down 13.7 percent year on year. The drop comes against the backdrop of a robust domestic electric vehicle (EV) market, where overall sales surged 35 percent in the first seven months of 2025 to 7.6 million units.

The divergence highlights a growing challenge for the U.S. automaker in the world’s largest EV market.

Domestic Brands Accelerate

While Tesla’s figures dipped, local competitors continued to build momentum. Hangzhou-based Leapmotor delivered 50,129 vehicles in July, marking its third consecutive monthly record and a 4.4 percent increase over June. The brand’s affordable EVs, priced near 100,000 yuan (US$13,900), have become a hit with cost-conscious buyers.

Xpeng, another domestic player, also broke its delivery record with 36,717 units sold. Sales rose 6.1 percent from June and surged 229 percent compared with a year earlier. Its Mona 03, priced at 119,800 yuan (US$16,700), offers an appealing alternative at roughly half the cost of Tesla’s base Model 3, which starts at 235,500 yuan (US$32,800).

The success of these brands underscores a shift toward value-driven EV purchases, where price competitiveness and local appeal matter more than premium branding.

Tesla’s Shrinking Share

Tesla’s share of the mainland EV market has dropped sharply. CPCA data shows the company held just 3.8 percent of the market in June, down from 6.9 percent a year earlier and far below its 16 percent share in 2020 when the Shanghai Gigafactory opened.

The premium EV segment is losing traction as budget-conscious consumers choose domestic options. Beijing’s push to end a price war has also kept discounts in check, further benefiting local brands offering lower starting prices.

Fighting Back With New Models

Tesla is preparing new products in an effort to regain lost ground. An upgraded Model 3 with an 800 km range is set to launch in China next month. The Shanghai plant is also scheduled to begin production of the Model Y L, a six-seat SUV with an extended wheelbase, this autumn.

These models aim to appeal to middle-income buyers seeking space and longer range, but their success will depend on pricing and how quickly Tesla can reassert its relevance.

Meanwhile, domestic rivals are moving aggressively. Li Auto, one of the few profitable EV makers in China, has launched the Li i8, a six-seat SUV starting at 321,800 yuan (US$44,800). Nio introduced the Onvo L90, also a six-seater, priced from 265,800 yuan (US$37,000). Both undercut or rival Tesla in features while aligning with local consumer expectations.

A Changing Consumer Landscape

Tesla’s challenges in China reflect more than just competition. Economic pressures, a weaker property market, and shifting attitudes toward foreign brands are reshaping consumer behavior. Domestic EV makers are not only offering lower prices but also tailoring products to local tastes, including software integration and user-focused features that resonate with buyers.

For Tesla, which once dominated the segment, it looks like staying competitive will require more than just new models, it’ll need to keep attentive as the Chinese road signs fragile loyalty, rising price sensitivity, and a market where domestic brands are increasingly setting the pace.