The Tesla Models Y and 3 are on display at a Tesla dealership in Corte Madera, California on December 20, 2024.
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Electric vehicle maker Tesla's sales in China climbed to a record high last year. Sustaining that performance in 2025 could prove difficult as competition from domestic players increases, analysts say.
The U.S. electric vehicle maker reported an 8.8% increase in annual sales in China in 2024 to a record high of more than 657,000 cars. According to Tesla China, sales rose 12.8% to 83,000 units in December alone compared to the previous month.
However, according to Bill Russo, founder and CEO of Automobility, Tesla has been losing market share to Chinese new energy vehicle players, from 7.8% in 2023 to 6% in January-November last year to keep [with domestic rivals] and has a limited and outdated product portfolio.”
Brand resilience and price cuts have supported Tesla's sales so far, said Tu Le, founder and chief executive of Sino Auto Insights. However, he said he is less certain about Tesla's ability to maintain its momentum in 2025 given the lack of new products and increasing local competition, particularly from Chinese companies.
Aggressive price war
Tesla cut the price of its best-selling Model Y in China by 10,000 yuan ($1,364.5) in late December and extended a five-year interest-free loan plan for car buyers until the end of January.
The best-selling Model Y now starts at 239,900 yuan after the discount, while the Model 3 sedan starts at 231,900 yuan – Tesla cut its prices by 14,000 yuan in April, according to its website.
Still, this represented a significant premium over a number of cheaper models offered by Chinese domestic automakers. BYD, which dominated the market with a market share of around 34%, prices one of its best-selling models, the Seagull, at 136,800 yuan, and the cheaper Yuan Plus model from 96,800 yuan.
TOPSHOT – People look at a BYD Seagull car from Chinese electric vehicle maker BYD Auto at the Bangkok International Motor Show in Nonthaburi on March 27, 2024. (Photo by Lillian SUWANRUMPHA / AFP) (Photo by LILLIAN SUWANRUMPHA/AFP via Getty Images)
Lillian Suwanrumpha | Afp | Getty Images
As the price war continues into the new year, Li Auto has introduced cash subsidies of 15,000 yuan per purchase as well as a three-year interest-free financing program, it said in a post last Thursday on its social media account Weibo. Nio also extended a similar three-year interest-free loan plan for its electric vehicle buyers.
The purchasing incentives came on top of a push by Chinese authorities to expand the consumer goods trade-in program, which provides subsidies to consumers to trade in old cars or appliances and buy new ones at a discount.
The government-subsidized trade-in program could further reduce Model 3 and Model Y prices by up to 50,000 yuan, Tesla China said.
“Tesla must provide aggressive discounts to keep up with the ongoing price war in the market,” Russo noted.
According to Joe McCabe, CEO and president of AutoForecast Solutions, despite dwindling market share, Tesla is unlikely to completely lose its market share in China. “phenomenal” technology.
“I don’t think Tesla is in danger of not surviving,” McCabe added [Elon Musk] needs to reduce the price by 5% because he can and that will help for small blips.
Head-to-head racing
In addition to the price cuts, Chinese electric car makers have launched a number of new models, many with fancy in-car features such as projectors, built-in refrigerators and driver assistance systems.
Meanwhile, Tesla has been slow to adopt these features as its product portfolio focuses exclusively on fully electric vehicles while its domestic competitors have moved to plug-in hybrid cars and extended-range electric vehicles.
These more traditional models appeal to buyers who are “still nervous about going all-electric.” [cars]said Sam Fiorani, vice president of AutoForecast Solutions. “Tesla has no plans for anything other than fully electric vehicles.”
The automaker's plans to launch its fully self-driving, monitored system still depend on regulatory approval in China, while several local competitors, including BYD, have made the advanced driver assistance systems a fundamental part of their offerings.
Musk had warned in January that Chinese automakers “could destroy most of the world's other automakers” unless regulators intervene with trade barriers, as Warren Buffet-backed BYD overtook Tesla as the world's best-selling electric vehicle company in the final quarter of 2023.
The U.S. imposed a 100 percent tariff on Chinese electric vehicles last September to protect its domestic industries from price pressure from heavily subsidized competitors from China. The European Union also decided late last year to impose tariffs of up to 45.3% on imported Chinese electric cars, while Tesla benefited from a lower tariff rate of 7.8%.
The trade barriers would force Chinese automakers to find buyers at home and in “smaller, friendlier” foreign markets, increasing pressure on Tesla's sales in China and elsewhere, Fiorani added.
Tesla's sales of Chinese-made electric cars, including exports to foreign markets, fell slightly 0.4% year-on-year to 93,766 units in December, according to a CNBC calculation based on data from the China Passenger Car Association.
BYD, which is subject to a 17% tariff on car exports to the European Union, still led the way with 509,440 cars sold in December, up nearly 50% from a year earlier.
—CNBC's Evelyn Cheng and Sonia Heng contributed to this report.
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