Tesla is still losing ground in the world's biggest EV market

By William Gavin

The company's struggles in China are part of the reason Tesla is expected to report another annual sales decline

Tesla expects to win regulatory approval to give customers in China access to its Full Self-Driving software in early 2026.

Tesla Inc.'s troubles in China are growing and continue to eat at the company's share of that country's automotive market, according to new data.

The China Passenger Car Association on Monday said Tesla (TSLA) sold 26,006 electric vehicles in China in October, down 35.8% from a year earlier and marking the U.S. company's worst monthly performance in three years.

New-energy vehicles - an industry term that groups different types of electric vehicles, including hybrids - accounted for 57.2% of China's passenger-vehicle market last month, the CPCA said. Tesla's share of that segment shrank to 2% in October from 5.5% in September, while "emerging" brands like Xiaomi Corp. (HK:1810) grew their share to 22.7% in October from 20.2% a month earlier.

But it wasn't all bad news for Tesla. The company exported 35,491 Model 3 sedans and Model Y SUVs made at its Shanghai plant, up from 27,795 vehicles in October 2024, according to the CPCA. Only BYD and Chery Automobile (HK:9973) exported more vehicles made in China than Tesla last month.

Still, 14 rival carmakers, including Xiaomi and Nio Inc. (NIO), beat Tesla's sales in China. Leading the charge were BYD Co. (BYDDY) (HK:1211), with 295,871 units sold, and Geely Automobile Holdings (HK:175), which sold 164,256 new-energy vehicles.

Between January and October, Tesla sold 667,861 vehicles made in China, according to CPCA data. That's a roughly 10% decline compared with the same period in 2024.

To get an idea of how important the market is for Tesla, the company generated $14.26 billion in revenue from China during the first nine months of the year, or 20.4% of total revenue of $69.93 billion.

Tesla's rough performance in the world's biggest market for electric vehicles - China makes up about two-thirds of the global EV market - as well as weakness in some parts of Europe are among the reasons the automaker is set to notch its second annual sales decline. The company is expected to sell 1.66 million EVs in 2025, according to FactSet estimates, compared with 1.78 million in 2024 and 1.8 million in 2023.

Next year may also be tough for Tesla, along with its rivals. China is halving a longstanding tax exemption for new-energy vehicles in January, and a 5% tax increase on purchases has also been proposed, according to CPCA Secretary-General Cui Dongshu.

Although that could hurt sales going forward, Tesla potentially has at least one trick up its sleeve. CEO Elon Musk said last week that Chinese regulators are expected to approve a full launch of Tesla's Full Self-Driving system "around February or March or so."

Tesla's system was partially approved in China in February, although its capabilities aren't as advanced as what is available in the U.S. Tesla's most advanced software package in China costs 64,000 yuan, or slightly less than $9,000, and about half that for a more limited package.

How much a full rollout of the system could help Tesla is unclear, especially since several rivals offer competing software. Some, including BYD and Geely's Zeekr brand, include driver-assist features for free with some or all of their vehicles.

-William Gavin

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11-10-25 1322ET