^{Photo: South China Morning Post}

Tesla is on track to experience its first full year sales decline in China, a market that has long been critical to its global expansion. In October, the company’s China sales fell to 26,006 units — the lowest monthly figure recorded in three years. The downturn comes amid intensifying competition, aggressive pricing strategies from local manufacturers, and an increasingly cautious consumer environment.

Tesla’s market share in China’s EV segment slipped dramatically to just 3.2% in October, down from 8.7% a month earlier. The numbers underscore a stark reality: Tesla is losing ground in a market now dominated by fast moving, cost efficient, and aggressively innovative Chinese brands.

Competition Tightens as Domestic Rivals Surge

Industry analysts note that Tesla is being squeezed from all sides by homegrown automakers. Companies like NIO and Li Auto, both reporting strong progress this week, continue to chip away at Tesla’s position.

Michael Dunne, CEO of Dunne Insights, described the situation vividly: “Tesla is being surrounded by a swarm of Chinese automakers from every direction — each one taking a slice of its market.”

The most significant new threat is Xiaomi. Once known solely as a tech and smartphone brand, Xiaomi has now cemented itself as a major EV competitor. Its YU7 SUV and SU7 sedan recorded record breaking sales in October, even as the company dealt with scrutiny over several safety related incidents.

In the third quarter alone, Xiaomi sold nearly 109,000 EVs — narrowing the gap with Tesla’s 170,000 units sold during the same period. Xiaomi’s EV division also turned a profit for the first time, signaling its rapid maturation in the sector.

Leapmotor and Geely Expand Their Footprints

Another rising disruptor is Leapmotor, a company that, despite being founded in 2015, only recently began outperforming many of its peers in both sales and stock market gains. Analysts attribute its momentum to tightly controlled internal production processes, allowing the company to price its vehicles aggressively. The Leapmotor C10 SUV, for example, costs roughly half the price of a Tesla Model Y.

Leapmotor has also strengthened its global strategy through a joint venture with Stellantis, giving it a path into European markets.

Meanwhile, Geely’s Geome Xingyuan has dominated China’s EV sales rankings in 2024. Though priced under $10,000 and not a direct competitor to Tesla, its success reveals another crucial trend: Chinese consumers are increasingly prioritizing affordability and value, which benefits domestic brands more than foreign ones.

Geely’s rise has also boosted Huawei’s automotive influence. Huawei collaborates with legacy automakers like Seres, Chery, and Beijing Auto, producing high-end models such as the Aito M8 — now a popular choice in the premium SUV category.

Tesla’s Position: Holding On but Under Pressure

Despite the growing competition, the Tesla Model Y remains a strong performer, ranking sixth among all vehicles sold in China. At Tesla’s recent annual shareholder meeting, CEO Elon Musk said he expects China to approve the company’s Full Self Driving (FSD) software by early 2026 — a development that could reinvigorate Tesla’s brand appeal in the region.

However, analysts argue that software alone will not be enough. Tesla’s main challenge is its aging lineup. With its core models reaching four to five years on the market, they now compete against newer, more technologically advanced vehicles from companies like BYD, XPeng, and Xiaomi.

Tu Le, founder of Sino Auto Insights, emphasized this point: “Reality is catching up to Tesla in China. They’ve used price cuts and clever marketing to keep older models alive, but not matching the pace of local brands is now clearly showing in the monthly numbers.”

Financial Overview and Market Outlook

Globally, Tesla posted third quarter revenue of $28.10 billion — a 12% increase year over year after two quarters of declines. But the growth masks regional challenges. In Europe, Tesla continues to see slumping sales, driven in part by fierce competition from established automakers like Volkswagen and fast growing EV players such as BYD.

With China accounting for a large portion of Tesla’s global volume, the sustained slowdown represents a critical warning sign. Industry observers say 2026 may be the company’s pivotal year, especially as it works to roll out refreshed designs and regain consumer interest.

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Tesla’s sharp drop in China highlights a major turning point in the global EV industry. Local competitors are now not only catching up — they are overtaking Tesla in innovation speed, pricing strategy, and consumer appeal.

For Tesla to maintain relevance and momentum in China, it must accelerate product updates, innovate beyond software, and regain competitive pricing flexibility. The world’s largest EV market is evolving rapidly, and Tesla now faces the most intense pressure it has seen since entering China more than a decade ago.