Tesla sales drop sharply in China, faces high competition from Chinese EV makers

Automobile giant Tesla is witnessing a decline in its sales in China. According to reports published by a Chinese trade group, the automobile company is losing its ground in the world's largest market for traditional and electric vehicles. The China Passenger Car Association reported that local sales of China-made vehicles plunged 69% to 8,621 cars from 28,138 in June. Tesla's sales in the first month of each quarter are usually lower than the following two months. In June, the company, which makes Model 3 sedans and Model Y sport-utility vehicles in Shanghai, sold 33,155 China-made vehicles.

Last month, Tesla introduced a cheaper version of the Model Y in China, where it faced increased scrutiny from both regulators and the public and growing competition from local rivals. It also lowered the starting price for Model 3 sedans.

Tesla face competition from Chinese EV makers

Critics say the steep decline of sales to Chinese consumers is yet another sign of the company's growing problems in the country. Tesla is contending with increased competition from Chinese EV makers as well as a run of bad publicity, including a recall of virtually all of the cars that have been built in Shanghai. The company also faced protests by Telsa owners at this year's Shanghai auto show over poor car quality and various safety concerns flagged by Chinese regulators.

According to analyst Gordon Johnson, Teslas accounted for just 3.9% of July sales of battery electric vehicles in China, down from 12.6% in June. Johnson who has been among the harshest critics of the company said that the decline shows that Tesla is facing fiercer competition from local EV startups.

"Overall, it now seems clear that Tesla has overbuilt Chinese capacity when compared to domestic demand, which will result in further price cuts and margin pressure," Johnson said. "Given China is supposed to be Tesla's 'growth market,' these numbers should concern any Tesla bull." The CPCA also stated that China sold 1.52 million passenger cars in July, down 6.4% from a year earlier.

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