Tesla’s shipments out of China have taken a significant hit, reflecting a broader slowdown in demand for the electric vehicle maker’s cars. According to the China Passenger Car Association (CPCA), Tesla’s February shipments fell to just 30,688 units, marking a steep 49% decline from the same month last year. This is also a drop of over 50% from January’s figures, which stood at 63,238. In contrast, wholesale sales of new energy vehicles (NEVs) in China surged by 82% year-on-year, reaching 840,000 units in February.
As a result, Tesla’s stock closed down 4.4% on Tuesday, bringing its year-to-date decline to 32.6%. This poor performance in China, one of Tesla’s largest markets, is a troubling sign for the company, especially after facing similar struggles in Europe.
Tesla’s shipments from China comprise both domestic sales and exports, meaning the decline in local sales could be even more pronounced. While January and February are typically weaker months for car sales in China due to the lunar holiday, Tesla’s downturn comes despite a general increase in the region’s sales figures for the month.
The CPCA also highlighted a shift in consumer preferences towards electrified vehicles, including hybrids and pure EVs, with a growing interest in integrating AI technologies into car interiors, like those offered by DeepSeek. However, Tesla’s efforts to roll out its autopilot and full self-driving (FSD) features in China have faced challenges due to regulatory hurdles and data privacy concerns. The company has only recently introduced a limited version of its autopilot in China, and the technology has been plagued with issues.
The drop in Tesla’s Chinese sales follows a similar trend in Europe, where the company has also seen declining demand. Analysts are concerned, with Bank of America cutting its price target for Tesla from $490 to $380, citing weaker sales in both Europe and China, as well as potential damage to the brand’s sentiment.
Tesla CEO Elon Musk’s political activities in the U.S. also seem to be affecting the company’s standing in Europe and the U.S. However, in China, Musk still enjoys a relatively favorable image. Nevertheless, political factors could complicate Tesla’s situation further. There are speculations that the Chinese government might delay approval of Tesla’s full self-driving technology as a bargaining chip in trade negotiations with the U.S., especially after the White House recently raised tariffs on Chinese goods to 20%.
Despite the political dynamics, Tesla’s challenges in China are more driven by market competition. Domestic automakers like BYD are producing more affordable vehicles with features such as autonomous driving that Tesla cannot match. BYD, for instance, is offering its “God’s eye” self-driving technology in vehicles that cost less than $15,000, undercutting Tesla’s offerings in the price-sensitive segment.
With political tensions and growing competition from local players, Tesla is facing mounting pressure in China, potentially putting its long-term position in the market at risk.
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