^{Photo: South China Morning Post}

Tesla managed to post modest growth in China-made electric vehicle deliveries in January, even as the broader EV market showed clear signs of cooling and competition intensified across the country.

Data from the China Passenger Car Association (CPCA) shows that Tesla shipped 69,129 vehicles from its Shanghai Gigafactory in January, up 9% from 63,238 units in the same month last year. The factory produces the Model 3 and Model Y for both China’s domestic market and export destinations across Europe and the Asia-Pacific region.

While the increase highlights Tesla’s continued relevance in the world’s largest EV market, analysts caution that the figures reflect factory shipments rather than end-user demand, suggesting the company is leaning heavily on exports and incentives to maintain volume.

Tesla Ranks Third as Chinese Rivals Extend Their Lead

January’s delivery numbers placed Tesla third among EV makers operating in China.

BYD remained firmly in first place with 205,518 vehicles delivered, followed by Geely at 124,252 units. Tesla’s 69,129 shipments underscore the widening scale gap between foreign and domestic brands, many of which are rapidly expanding production while offering aggressively priced models tailored to Chinese consumers.

Although Tesla continues to rank among the top players, CPCA data also shows that total sales of China-produced Teslas declined by 4.8% over the full year of 2025, making it one of only two major manufacturers in the country to post an annual drop.

This divergence highlights a growing challenge for Tesla: maintaining momentum in a market increasingly dominated by local brands with broader lineups and lower price points.

Price Wars Intensify as Demand Softens

China’s EV landscape has become a battleground of affordability.

Tesla’s base Model 3 currently starts at around 235,500 yuan (approximately $33,900), nearly three times the entry price of BYD’s Seal, which begins near 79,800 yuan. That pricing gap has pushed Tesla to deploy aggressive incentives to stay competitive.

To stimulate demand, Tesla is now offering five-year zero-interest financing and seven-year ultra-low interest loans for orders placed before the end of February, according to its China website. These promotions mirror tactics used throughout 2024 and 2025, when automakers repeatedly cut prices to defend market share.

Industry analysts describe the environment as one of prolonged margin pressure. Abby Tu, principal research analyst at S&P Global Mobility, noted that China’s EV sector has been locked in an intense price war, even as regulators and industry groups urge manufacturers to avoid destructive discounting.

Despite these efforts, overall market growth continues to decelerate.

CPCA figures show that new energy vehicle sales, which include battery electric and hybrid models, rose just 1% year over year in January. This marked the fourth consecutive month of slowing growth, a sharp contrast to the double-digit expansion rates seen in previous years.

Subsidy Rollbacks Add to Market Headwinds

Another major factor weighing on demand is the rollback of government support.

Starting January 1, China reinstated a 5% purchase tax on new energy vehicles, ending a long-standing exemption that had shielded buyers from the full 10% levy for more than a decade. The policy shift directly increases upfront costs for consumers and is widely expected to dampen near-term sales, particularly in price-sensitive segments.

With subsidies fading and household spending under pressure, automakers now face a more normalized market environment, where brand strength, technology, and pricing discipline matter more than policy tailwinds.

For Tesla, this transition comes at a time when domestic competitors are rolling out new models at a rapid pace, spanning everything from compact city cars to premium smart vehicles.

New Safety Rules Could Force Design Changes

Beyond pricing and demand challenges, Tesla is also preparing for regulatory changes that may affect its vehicle designs.

China’s Ministry of Industry and Information Technology recently announced that from January 1, 2027, all cars sold in the country must be equipped with both interior and exterior mechanical door releases. The move follows several high-profile accidents in China and abroad where occupants were unable to exit EVs due to power failures affecting electronic door mechanisms.

Tesla’s flush door handles, a hallmark of its minimalist design language, could be impacted by the new rules. Analysts say compliance may require engineering adjustments that add cost and complexity.

Tu Le, founder and managing director of Sino Auto Insights, described the regulation as a potential “decent-sized headache” for Tesla, given how central hidden handles are to its brand identity. However, he added that most Chinese automakers are unlikely to be significantly affected, as regulators typically consult domestic manufacturers during the drafting process.

While companies have nearly two years to adapt, the changes underscore how regulatory evolution in China can create additional hurdles for foreign brands.

Looking Ahead: Resilience Tested in a Tougher Market

Tesla’s January performance shows that the company can still generate volume from its Shanghai hub, supported by exports and targeted incentives. However, the broader picture points to mounting pressure from slowing industry growth, shrinking subsidies, relentless price competition, and evolving regulations.

With Chinese brands continuing to scale rapidly and introduce lower-cost alternatives, Tesla’s success in 2026 will likely hinge on how effectively it balances pricing, product updates, and local adaptation.

For now, the U.S. automaker remains a significant player in China’s EV ecosystem. But as the market matures, Tesla’s ability to defend share and profitability will be tested more than ever in a landscape increasingly shaped by domestic champions and tighter policy frameworks.

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