China Has Turned Against Tesla

Tesla’s reputation as an unstoppable EV juggernaut is taking a serious hit, and nowhere is that more evident than in China. According to a recent CNBC report, Tesla’s China sales dropped 11.5% in January 2025 compared to the same period last year. In a market that now dictates the global EV landscape, Tesla is bleeding ground to local competitors like BYD.

The Chinese EV market is not just outselling Tesla; they’re obliterating it. In January alone, BYD delivered 30% more EVs than Tesla globally. The reason? Cost and variety.

While Tesla has relied on price cuts to remain competitive, BYD and other local brands are simply cheaper to begin with. Tesla’s once-impressive margins are being squeezed to the bone, while BYD continues to scale production and maintain profitability. The Model 3 and Model Y, Tesla’s bread-and-butter vehicles, are now struggling against a flood of more affordable, high-tech, and government-backed competitors.

For years, Tesla benefited from China’s policies supporting foreign EV investment. That honeymoon phase is over. The Chinese government has made it abundantly clear that they want to dominate the global EV market with homegrown brands, and Tesla is an outsider in a field where local champions like BYD, Nio, and XPeng are given preferential treatment.

Tesla’s reliance on Shanghai’s Gigafactory is becoming a double-edged sword. While it allowed the company to scale rapidly in China, the government could easily tighten regulations, limit access to subsidies, or favor domestic players—all of which would further erode Tesla’s position.

Elon Musk has relied on aggressive price cuts to keep demand afloat, but this approach is looking increasingly desperate. The latest 11.5% drop in China sales suggests that Tesla’s race to the bottom isn’t working. Slashing prices over and over doesn’t build brand loyalty—it signals that Tesla is struggling to maintain demand.

The company can’t keep eroding its profit margins indefinitely, especially when competition is growing stronger, not weaker.