Elon Musk Responds to Tesla’s Declining Market Share in China

It was reported that Tesla’s share of the electric vehicle market in China has dropped from 9% a year ago to 6.5% in July this year. Since 2019, Tesla has not released any new electric vehicles in China.

In response, Elon Musk stated, “Anyone who believes these reports is foolish. Tesla’s Shanghai factory is running at full capacity.”

It’s worth noting that these two statements are not entirely contradictory. The former mainly discusses market share, while Musk’s response focuses more on production and sales. In other words, despite fluctuations in sales growth, Musk probably can’t deny the reality that Tesla’s market share in China is facing challenges.

Official data shows that last year, Tesla’s Shanghai Gigafactory increased its annual production capacity to 950,000 vehicles. The factory can actually produce about 1.1 million cars a year, which would mean producing approximately 90,000 cars per month at full capacity.

After experiencing a decline in deliveries in China during the first half of the year, Tesla’s sales grew in the most recent month. According to the China Passenger Car Association, Tesla’s China factory delivered 86,700 vehicles in August, a year-on-year increase of 3% and a month-on-month increase of 17%.

Tesla’s sales in the domestic market exceeded 63,000 vehicles that month, roughly a 2% year-on-year decrease, but a 37% increase from the previous month. This broke the company’s record for domestic sales this year. One important factor behind the increase in sales was the government’s intensified subsidies for replacing old cars with new ones, which boosted demand in the electric vehicle market.

At the end of July, the government announced that subsidies for scrapping and replacing cars would increase to 20,000 yuan for new energy vehicles, 5,000 yuan more than for gasoline vehicles. The subsidy advantage has further stimulated consumer enthusiasm in the new energy vehicle market. Official data shows that by the end of August, over 800,000 applications for car replacement subsidies had been received.

However, this also means that not only Tesla, but also many of Tesla’s main competitors in China have won the favor of consumers and converted orders. Data shows that many Chinese car manufacturers that pose a threat to Tesla achieved double-digit percentage growth in sales in China that month.

BYD’s sales in August increased by 35% year-on-year, setting a new record. This car company, which has the potential to compete with Tesla for the title of the world’s largest pure electric vehicle manufacturer, has sold over 300,000 units for six consecutive months. Among other companies, new carmaker Li Auto saw a year-on-year increase of 38% in deliveries that month, and Geely Auto Group’s new energy vehicle sales increased by about 65%.

Chinese media Jiemian quoted an unnamed automotive marketing expert as saying that compared to overseas users, Chinese consumers place more emphasis on new technologies, including battery electric drive, smart cockpit, entertainment system, intelligent driving, and so forth. Tesla, with its slow product update pace, is struggling to maintain its attractiveness in the Chinese market. “Repeated delays in the implementation of fully autonomous driving have also led to the rapid fading of its brand halo.”

As Tesla’s performance in China is no longer unrivaled compared to its competitors, market news in early September suggested that Tesla plans to start producing a six-seater version of the Model Y domestically by the end of 2025. Some comments suggest that this move aims to respond to competitive pressure, mainly because Chinese competitors’ products have already far exceeded in terms of space and comfort.

Tesla China refuted this news. However, the continuous rumors about product planning reflect the outside world’s high attention to Tesla’s new models, but even the rumors lack imagination for the brand’s significant innovation. Once a trendsetter, people are now more concerned about how it can avoid a downhill path in the world’s largest and most competitive electric vehicle market.

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