In 2024, Tesla set a sales record in China. But this year will be difficult

Last year, sales of the electric car manufacturer Tesla in China reached a record level. According to analysts, maintaining such figures in 2025 may prove difficult, as competition from homegrown players intensifies.

The American electric car maker’s annual sales in China in 2024 rose 8.8% to a record high of more than 657,000 vehicles. According to Tesla China, its sales rose 12.8% month-on-month to 83,000 units in December alone.

However, according to Bill Russo, founder and CEO of Automobility, Tesla is losing market share to Chinese players in new energy vehicles, falling from 7.8% in 2023 to 6% between January and November last year. “is struggling to keep up (with domestic competitors) and has a limited and aging product portfolio.”

Brand stability and lower prices have supported Tesla’s sales so far, said Tu Le, founder and managing director of Sino Auto Insights, but he is less confident that Tesla will be able to maintain its momentum in 2025 given the lack of new products and growing local competition. , especially from Chinese companies.

Tesla has cut the price of its best-selling Model Y in China by 10,000 yuan ($1,364.5) at the end of December and extended a five-year interest-free loan plan for car buyers until the end of January.

Its best-selling Model Y now starts at 239,900 yuan after discount, and the Model 3 sedan starts at 231,900 yuan — Tesla cut prices by 14,000 yuan in April — according to its website.

Still, it represented a significant premium over a number of cheaper models offered by Chinese automakers. BYD, which dominated the market with a market share of around 34%, ranks as one of the best-selling models Seagull at 136,800 yuanand the more affordable Yuan Plus model, from 96,800 yuan.

As the price war continues into the new year, Li Auto has introduced cash subsidies of 15,000 yuan per purchase along with a three-year interest-free financing scheme, according to post last Thursday on its Weibo social media account. Nio too extended a similar three-year zero interest rate credit plan for its EV buyers.

The buying incentives come on top of efforts by Chinese authorities to expand a consumer trade-in program that subsidizes consumers to sell used cars and appliances and buy new ones at a discount.

Tesla China said a government-subsidized trade-in program could further reduce the prices of both the Model 3 and Model Y to 50,000 yuan.

“Tesla needs to aggressively lower prices to keep up with the ongoing price war in the market,” Russo noted.

Despite its declining market share, Tesla is unlikely to completely lose ground in China, according to Joe McCabe, CEO and president of AutoForecast Solutions, who likened Tesla to the “Apple of Cars,” an “early entrant” in the electric vehicle space with “phenomenal” technology. .

“I don’t think Tesla is at risk of not surviving,” McCabe added, “all (Elon Musk) has to do is drop the price by 5% because he can, and it will help with small mistakes.”

In addition to the price cuts, Chinese electric car manufacturers have released a slew of new models, many with fantasy in the car featuressuch as projectors, built-in refrigerators and driver assistance systems.

Meanwhile, Tesla has been slow to implement any of these features, with its product portfolio focused solely on fully electric vehicles, while its homegrown rivals have focused on hybrids and the extended-range EV category.

Those more traditional models appeal to buyers who are “still concerned about the transition to all-electric (cars),” said Sam Fiorani, vice president of AutoForecast Solutions. “Tesla plans nothing but all-electric cars.”

The automaker plans to launch its fully self-driving system under supervision subject to regulatory approval in China, while several local competitors are have made advanced driver assistance systems a core part of their offeringincluding BYD.

In January, Musk warned that Chinese automakers could “destroy most other car companies in the world” unless regulators intervene with trade barriers as Warren Buffett-backed BYD overtakes Tesla as the world’s best-selling electric car company in the last quarter of 2023.

USA introduced 100% duties on Chinese electric cars last September to protect its homegrown industries from price pressure from heavily subsidized Chinese peers. The European Union also moved to introduce tariffs up to 45.3% on Chinese electric cars imported late last year, while Tesla enjoyed a lower tariff rate of 7.8%.

Trade barriers will force Chinese automakers to find buyers at home and in “smaller, friendlier” foreign markets, adding pressure on Tesla’s sales in China and elsewhere, Fiorani added.

Tesla’s sales of Chinese electric cars, including exports to foreign markets, fell slightly to 0.4% compared to last year to 93,766 units in December, according to CNBC calculations based on data from the China Automobile Association.

BYD that is subject to tariff duty of 17%. for car exports to the European Union, continues to lead the rankings with 509,440 cars sold in December, up nearly 50% year-on-year.

— CNBC’s Evelyn Cheng and Sonia Heng contributed to this report.