Tesla’s China Sales Collapse 45% as Domestic Demand Plunges

Tesla’s retail sales in China fell dramatically in January, dropping 45% year-over-year to just 18,485 units—the lowest monthly figure since late 2022. While some of the decline can be attributed to seasonal factors and a record-breaking December, the magnitude of the drop underscores a troubling trend for Tesla in its most important foreign market.


Exports Mask the Real Struggle

On the surface, Tesla’s wholesale deliveries from its Shanghai factory reached 69,129 units, up 9% year-over-year. However, this figure hides the underlying weakness: nearly three-quarters of the vehicles produced were shipped abroad, leaving just 18,485 for Chinese buyers. In previous years, exports accounted for roughly 44–47% of output, highlighting how Tesla is increasingly relying on overseas demand rather than domestic consumers.


Falling Behind Local Competitors

Tesla’s Model Y fell to 20th place in China’s passenger vehicle rankings, while rivals like Xiaomi saw their YU7 model outsell Tesla by a wide margin. The Model 3 faced similar challenges, with domestic deliveries lagging behind Xiaomi’s SU7 by nearly threefold. The competitive pressure is intensifying as domestic brands frequently launch new models with competitive pricing and advanced features.


Structural Challenges Beyond Incentives

Several factors contributed to the slump, including a pull-forward effect from record December sales ahead of tax changes and the expiration of local vehicle trade-in subsidies. Yet even with aggressive promotions—such as 0% financing, ultra-low interest loans, and insurance incentives—Tesla could not offset the steep decline. The data reflects a deeper issue: Tesla’s aging lineup struggles to compete in a market saturated with fresh, locally made EVs.


A Trend, Not a One-Month Blip

This downturn is part of a broader pattern. Tesla experienced its first annual decline in Chinese retail sales in 2025, with market share slipping from 10% to 8%. The January figures indicate the downward trajectory is accelerating. Without the introduction of new models or innovative offerings tailored to Chinese consumers, Tesla’s domestic sales could continue to slide in the coming months.


Tesla’s Shanghai operation is increasingly functioning as an export hub rather than a driver of local demand. While a modest rebound may occur as production is redirected to domestic deliveries later in the quarter, the long-term outlook in China points to mounting challenges unless the company delivers truly new products that resonate with local buyers.