Tesla posted record China sales in 2024. But this year is going to be rough

Electric vehicle maker Tesla’s sales in China hit a record high last year. Sustaining this performance in 2025 could be difficult as competition with domestic players intensifies, analysts said.

The US electric vehicle maker saw annual sales in China jump 8.8% to a record high of more than 657,000 cars in 2024. In December alone, its sales rose 12.8% from the previous month to 83,000 units, according to Tesla China.

However, Tesla has lost market share to Chinese players of new energy vehicles, from 7.8% in 2023 to 6% in the period from January to November last year, according to Bill Russo, founder and CEO of the Automobile, which I believe Tesla is. “They struggle to keep pace [with domestic rivals] and has a limited and aging product portfolio.”

Brand resilience and price cuts have supported Tesla’s sales so far, said Tu Le, founder and chief executive of Sino Auto Insights, but he was less certain Tesla could maintain its momentum in 2025, given the lack of new products and the increase of local competition. , especially from Chinese companies.

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

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

However, this marked a significant premium over a range of cheaper models offered by Chinese domestic carmakers. BYD, which dominated the market with about 34% market share, prices one of its best-selling models Seagull at 136,800 yuanand the cheapest Yuan Plus model, starting from 96,800 yuan.

As the price war extends into the new year, Li Auto has introduced cash subsidies of 15,000 yuan per purchase with a three-year interest-free financing scheme, according to a post last Thursday on his Weibo social media account. Neither do I extended a similar zero interest of three years loan plan for its EV buyers.

The purchase incentives come on top of a push by Chinese authorities to expand the consumer goods trade-in program, which subsidizes consumers to trade in old cars or appliances and buy new ones at a discount.

The government-subsidized trade-in program could also lower prices for the Model 3 and Model Y by up to 50,000 yuan, Tesla China said.

“Tesla has to discount aggressively to keep up with the ongoing price war in the market,” Russo said.

Despite declining market share, Tesla is unlikely to completely lose ground in China, according to Joe McCabe, CEO and president of AutoForecast Solutions, who has compared Tesla to “the Apple of cars” – a “early adopter” in the EV space with “phenomenal technology”.

“I don’t think Tesla is at risk of not surviving,” McCabe added, “at all.” [Elon Musk] he has to do is lower the price by 5%, because he can, and that will help for small blips”.

In addition to lowering prices, Chinese electric carmakers have launched a host of new models, many with fantastic features in the carsuch as projectors, built-in refrigerators and driver assistance systems.

Meanwhile, Tesla has been slow to adopt any of these features, with its product portfolio focused solely on fully electric vehicles, while its domestic rivals have led the way in plug-in hybrid cars and extended-range EV categories.

These more traditional models appeal to buyers who are “still worried about the jump to electricity completely [cars]”said Sam Fiorani, vice president of AutoForecast Solutions. “Tesla has no plans for anything other than fully electric vehicles.”

The automaker’s plans to launch its fully autonomous driving system are still on the way it relies on regulatory permission in China, while many local competitors have has made advanced driver assistance systems a basic part of its offeringincluding BYD.

Musk had warned in January that Chinese manufacturers could “Demolish most other car companies in the world” unless regulators intervene with trade barriers, as Warren Buffet-backed BYD has overtaken Tesla as the world’s top-selling EV company in the last quarter of 2023.

The United States imposed a 100% duty on Chinese EVs last September to protect its industries at home from price pressure placed by heavily subsidized peers from China. The European Union has also moved impose fees up to 45.3% on imported Chinese EV cars at the end of last year, while Tesla had a lower 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 China-made EVs, including exports to foreign markets, fell modestly 0.4% from a year ago to 93,766 units in December, according to CNBC’s calculation of China Passenger Car Association data.

BYD, that is subject to tariff duties of 17%. for car exports to the European Union, it still led the ranking with 509,440 cars sold in December, a jump of close to 50% year on year.

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