Tesla keeps bleeding market share in China

The global electric car industry is constantly shifting, but few markets are as intensely competitive as China. American automaker Tesla is discovering just how tough that arena has become. Despite relentless efforts to attract buyers, including big discounts and the introduction of new models, the company continues to see its sales shrink.

Data compiled from insurance filings paints a clear picture of the struggle. In the third quarter, Tesla's deliveries in China fell by 8%, an acceleration of the decline seen earlier in the year. This drop brings their year-to-date sales down by 6.4%.

The worsening performance comes even as Tesla rolls out one incentive after another. The automaker has maintained strong discounts all year, offering 0% interest rates on financing its top-selling models, the Model 3 and Model Y.

The company's struggle is not due to a lack of effort. In the third quarter, Tesla began delivering the new Model Y L in China. This six-seater variant is a slightly larger version of the popular Model Y, featuring a longer wheelbase. The base price for the Model Y L starts at RMB 339,000 ($47,600). The introduction of this new SUV helped soften the overall decline, but it wasn't enough to reverse the negative trend.

The intense competition is forcing Tesla to adjust prices and incentives constantly. The automaker recently cut the price for the rear-wheel-drive Model 3 - which offers a driving range of 516 miles - by nearly 4% less than a month after the updated sedan's launch in China.

In a hyper-competitive environment, Tesla's rivals are gaining steam. Chinese competitor Xiaomi, better known for its phones, has made a major splash. Its first SUV, the YU7, received massive attention, with over 240,000 locked-in orders placed in less than a day after its June launch. The Model Y L's starting price is about 3% higher than the top-end version of the Xiaomi YU7.

Xiaomi's SU7 sedan has also been a thorn in Tesla's side, outselling the Model 3 in China on a monthly basis since December. Even Tesla's primary Chinese rival, BYD, is experiencing a softening in its home market, marking four straight months of sales decline.

To boost orders, Tesla frequently uses deadlines for its attractive incentives, such as the subsidized 0% interest rates. But with consistent demand issues, the company is often forced to reinstate those offers quickly.

The fourth quarter is no different; Tesla has already announced that the 0% APR financing will be available for the Model 3 and Model Y through October 31. The company is also allowing customers to transfer their "Intelligent Assisted Driving" software - the Chinese equivalent of the Full Self-Driving system - to a new vehicle until the end of October.

The global picture is far more complicated. Tesla's Shanghai factory deliveries of the Model 3 and Model Y - including exports to Europe and other markets - did rise by 22.6% from July to August, hitting 83,192 units. Unfortunately, this month-over-month increase doesn't mask the underlying issues in the Chinese market.

Data from the China Passenger Car Association indicated a 4% year-over-year drop in China-made Tesla EV sales in August, following an 8.4% fall in July. The company also saw its sales across Europe plummet by 40.2% in July compared to the previous year, trailing BYD despite the overall rise in European EV sales.

It is painfully becoming clear that the days of Tesla being the undisputed king of electric cars are over, especially in China. The market is maturing, and homegrown brands are offering competitively priced EVs that meet local tastes and needs. The combination of price wars, a surge in appealing local models, and consumer perception challenges - including a backlash against company leadership politics - has created a perfect storm for the American automaker.

Via