Tesla’s once-celebrated dominance in China is rapidly fading. Once welcomed as a strategic partner and visionary, Elon Musk is now losing ground in what was Tesla’s second-largest market. In May 2025 alone, Tesla’s sales in China dropped 30% year-over-year, even as overall demand for electric vehicles in the country continues to grow.

Tesla’s Market Share Plummets as Rivals Surge

Tesla sold fewer than 40,000 vehicles in May, compared to over 57,000 in the same month last year. Its market share has shrunk to just 4%, down from 11% in early 2021. Meanwhile, BYD controls 29% of China’s EV and plug-in hybrid market, with companies like Xiaomi quickly rising.

Chinese brands are outperforming Tesla with feature-rich vehicles—extra displays, in-car entertainment, selfie cameras, mini fridges, and full mobile app integration. In contrast, Tesla is now seen as outdated. Local buyers say the brand feels “tired” and behind the curve.

Tesla Ignored China Team’s Warnings

For years, Tesla’s team in China warned headquarters that local customers demanded more functionality, native apps, and smartphone integration. Reports from 2021, 2023, and 2024 were submitted but dismissed by U.S. executives, who stated entertainment and localization were "not priorities." The only change since? The addition of Mango TV, while Chinese competitors offer dozens of apps.

At the same time, Tesla sales teams in China are under growing pressure. One Beijing dealer reported his weekly sales target jumped from four to seven vehicles, while working hours increased from 10 to 12 per day. With aging models and increasingly competitive rivals, employees say they are running out of tools to close deals.

No New Model for China – Just a Cheaper Tesla

Plans to develop a China-tailored vehicle were canceled. Instead, Elon Musk ordered feature cuts and launched a stripped-down version of the Model Y, priced at $36,700—while BYD’s Sealion 07 starts at only $26,400.

Beijing Cools on Musk: From Strategic Partner to Irrelevance

Once seen as a vital bridge between China and the U.S., Musk’s standing in Beijing has cooled. In January 2025, he met with Vice President Han Zheng, who expressed hopes that Tesla would help improve U.S.–China ties. Musk offered little in return. Since then, Chinese officials no longer view him as strategically useful.

At the same time, Tesla cannot deploy its Full Self-Driving (FSD) system in China, because the AI powering it was trained on U.S. data—something Chinese law prohibits. An attempt to move FSD training to China failed, as U.S. export controls restrict access to the necessary chips.

Regulators: “Drivers Are Not Lab Rats”

In February, Tesla tried to quietly roll out parts of FSD via a wireless update—exploiting a regulatory gray area. Chinese authorities shut it down, clarified the rules, and blocked a one-month trial Tesla offered in March. Regulators stated Tesla “should not treat drivers like lab rats.”

While Tesla Stalls, Chinese Firms Accelerate

As Tesla stumbles, Chinese firms are charging ahead. XPeng’s XNGP and BYD’s Eyes of God now offer advanced driving features. Baidu and Pony AI are already operating robotaxi fleets. Tesla? Still nothing in this space.

Even Robots and Batteries Reveal Tesla’s Dependency on China

In March, Tesla began shipping Megapack batteries from its new Shanghai plant to Australia—but Chinese battery giant CATL dominates the market. Even Tesla’s Optimus humanoid robot, built in the U.S., relies on Chinese-made parts. Despite new U.S. tariffs, Tesla has continued sourcing components from its Chinese suppliers to keep costs low.

Now, those same suppliers are collaborating with local robotics startups like Unitree and Agibot.

“Once you have Tesla contracts, domestic robotics firms are much more willing to work with you,” said Chen Feng, marketing manager at one of Tesla’s suppliers. This could put Elon Musk back in the same position as with EVs—surrounded by rivals he helped empower.

During a recent earnings call, Elon Musk admitted:

“I’m a little worried that spots two through ten on the leaderboard will all be Chinese companies.”


#ElonMusk , #china , #stockmarket , #Tesla , #ROBOTAXI



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