Tesla's Local Sales in China Plunged 69% in July Compared to June

author: FutureCar Staff    

Tesla Model 3s at the Port of Shanghai being prepared for shipment to Europe in Oct 2020.

As the world's most valuable automaker with a market cap topping $700 billion, Tesla Inc. has led the global auto industry's transition to electrification. But now the California company is facing slowing EV sales in China, which is the world's biggest auto market.

Tesla's July sales figures in China were announced on Tuesday and it shows that most of the electric vehicles it built at its Shanghai factory last month were exported to other countries.

In July, Tesla sold a respectable 32,968 China-made vehicles, however 24,347 of them were for export, the China Passenger Car Association (CPCA) said on Tuesday. Local sales of China-made Tesla vehicles fell by 69% to just 8,621 cars compared to June when Tesla sold 28,138 electric vehicles to customers in China. 

In total, the CPCA reported sales of 1.52 million passenger cars in July, which is down 6.4% from a year earlier.

While Tesla's declining sales might appear concerning, the company's sales in the first month of each quarter have been generally lower than the following two months, so Tesla could very well rebound in August.

Tesla opened its Shanghai factory in late 2019, its first overseas plant, in order to build cars locally and avoid China's steep import tariffs on autos. China is the world's biggest auto market and an important one for Tesla to remain profitable. Without the import tariffs, Tesla can price its vehicles more competitively and still maintain its profit margins.

The company currently builds the Model 3 sedan and Model Y crossover in Shanghai. 

But Tesla faced a series of setbacks this year that has tarnished its reputation in China, including clashes with regulators and criticism of how it handled customer complaints and data. In addition, Tesla is facing increasing competition from electric vehicle startups like XPeng and NIO Inc. as well as from China's established automakers that are introducing their own electric models. 

Chinese automaker BYD sold 50,387 electric vehicles in China last month. While EV startup XPeng reported its highest ever monthly deliveries of 8,040 electric vehicles in July, just slightly less than Tesla. For Xpeng, it represents a 228% increase year-over-year and a 22% increase in June compared to Tesla's massive drop of 69%.

Tesla recently cut prices in China in the hope it will lead to higher sales. Last month, Tesla introduced a more affordable version of the Model Y for China. It also lowered the starting price for the Model 3 sedan to US$36,371. The Standard Range Plus Model 3 starts at $39,990 in the U.S.

Tesla is also facing growing competition in the U.S. market, as new EVs hit the market from Ford Motor Co, Volkswagen, General Motors and EV startup Rivian. 

Ford's Mach-E SUV remains a strong seller and the electric Ford F-150 Lightning will be available in early 2022. General Motors also has big EVs plans, and is working on an electric Chevy Silverado, GMC Hummer EV and Cadillac Lyriq SUV. Rivian's R1T electric pickup will be available later this year. All of these new EVs mean more competition for Tesla.

Tesla recently announced that its was delaying its futuristic Cybertruck to 2022, which will be built at Tesla's new factory in Austin TX. The company will instead prioritize production of the Model Y, which makes sense since crossovers and compact SUVs are very popular with consumers right now.

FutureCar Staff