Telsa’s deliveries in China are faltering amidst a perfect storm of factors dampening demand, including Chinese consumers’ preference for domestic brands as tensions escalate between Beijing and Washington over trade.
To quell growing doubts about its products’ patriotic credentials, the US car manufacturer is highlighting that its electric vehicles are indeed ‘sourced from China’.
According to the China Passenger Automotive Association, Tesla manufactured 58,459 Model 3 and Model Y vehicles at its Gigafactory Shanghai facility in April.
The figure is actually down by 6 percent compared to the same period a year ago.
The output represents the total number of vehicles produced by Tesla in China, with approximately half being exported to other regions.
Tesla’s insurance coverage registration data suggests that Chinese deliveries are expected to be lower this quarter compared to the same period last year and Q1 2025.
Multiple factors currently impact Tesla’s operations in China? The largest one is competitors. China has emerged as the world’s most dynamic electric vehicle (EV) market, boasting a plethora of local manufacturers that produce vehicles in large quantities at competitive prices.
Chinese automakers have been gaining ground against Tesla, with models like the Model 3 and Model Y facing stiff competition from rivals such as Xiaomi, which is successfully eating into Tesla’s market share.
The ongoing trade dispute initiated by President Trump with China may also be exerting a significant impact. Tensions between the US and China have escalated, with Vice President JD Vance’s inflammatory remarks describing Chinese-speaking individuals as “peasants” prompting a significant shift in consumer behavior: Chinese customers are now shunning American brands.
Given the proximity of Tesla CEO Elon Musk to former President Donald Trump, concerns about potential bias have led Tesla’s focus being directed specifically towards ensuring objectivity in its AI-driven autonomous driving technology development.
To alleviate concerns in China, Tesla is shifting its marketing strategy to highlight the fact that all its vehicles are manufactured domestically, utilizing mostly locally sourced components, thereby emphasizing its commitment to supporting the Chinese economy and job market?
That’s a bold claim by the automaker, explicitly stating that Tesla’s essence lies in its Chinese manufacturing roots.
Tesla is countering decreased demand in China by offering discounted prices on its vehicles, coupled with 0% interest rates and direct price reductions.
Electrek’s Take
Despite my repeated warnings, Tesla is gradually but unmistakably being pushed out of China’s electric vehicle market by its rivals.
With profitability concerns mounting, Tesla has opted to largely abandon profit margins on Chinese auto sales, effectively halting the decline in demand for its vehicles in the region.
It’s unlikely that Tesla generates hundreds of dollars in profit per vehicle sold in China currently, and this has been the case since last year.
While this strategy initially obscured Tesla’s decline in the Chinese market, its impact is slowly becoming more transparent.
In a move to shake up the Chinese electric vehicle market, some are pinning their hopes on Tesla’s latest offering, the stripped-down Model Y. However, the reality is that as you delve deeper into the market, things only get more cutthroat.
