Elon Musk's Tesla Enjoys Strong Sales in China - but Market Share Continues to Erode

Tesla’s car sales in China reached their highest point for 2024 in August, but the company is still losing market share to domestic rivals like BYD, according to a recent report.

Fortune reports that Elon Musk’s Tesla has experienced a mixed bag of results in the Chinese market this year. While August saw the company’s highest monthly sales figures for 2024, a report by Shanghai consultancy Automobility reveals that Tesla’s market share in China’s New Energy Vehicles (NEV) sector has declined from nearly nine percent a year ago to just 6.5 percent in the first seven months of this year.

Despite this decline, Tesla CEO Elon Musk dismissed the report as “silly” in a social media post, emphasizing that the company’s Shanghai factory is operating at maximum capacity. However, Musk did not directly dispute the report’s findings.

Data from the China Passenger Car Association (CPCA) suggests that Tesla’s Shanghai factory produced around 86,700 vehicles in August, with approximately 23,250 cars being exported and the remaining 63,500 sold domestically. Although this represents Tesla’s best month in China so far this year, it still marks a year-on-year drop of 1.9 percent, with flat domestic sales of 388,000 through the first eight months, according to calculations by Chinese EV publication CnEVPost.

China’s NEV market, which includes plug-in hybrids and hydrogen fuel cell cars alongside pure electric vehicles, is expected to surpass one million vehicles in August alone, marking a 42 percent growth over the previous year. However, demand has shifted away from pure EVs, with Tesla’s rival BYD reporting that the majority of its volume growth came from plug-in hybrids. As Tesla does not offer vehicles in this category, the company had to reduce production in April to alleviate pressure on unsold vehicle inventories.

Tesla’s business heavily relies on exports from its Shanghai factory, which produces more than half of all Tesla cars globally, with about a third destined for export. The factory has a combined production capacity of over 950,000 Model 3 and Model Y units annually, translating to a monthly volume of roughly 80,000 vehicles.

However, Tesla’s sales could now face collateral damage from a backlash against Chinese EV manufacturers, who have been expanding into overseas markets amidst a slowdown in economic growth and a fierce price war that Musk himself helped initiate. The EU recently imposed an additional nine percent import duty on Tesla’s China-made cars as part of a broader crackdown on Chinese EV manufacturers, while Canada has also implemented an extra tariff that effectively makes Tesla’s exports from Shanghai prohibitively expensive.