Tesla is taking steps to address its declining sales in China, the world’s largest electric vehicle (EV) market. The US-based company is designing a more affordable version of its popular Model Y and investing in improvements to its autonomous-driving software.
The new Model Y variant is slated to be 20 percent cheaper than current models, which range from 263,500 yuan (US$36,406) to 303,500 yuan. Production is expected to begin next year at Tesla’s Shanghai factory, according to sources familiar with the matter.
In addition, Tesla has dispatched engineers to Baidu to enhance the integration of Baidu’s mapping data with Tesla’s driver-assistance system. The goal is to improve the system’s ability to recognize lane markings and traffic signals in mainland China, Reuters reported. Both companies have declined to comment on the development.
The interest in Tesla’s locally-made vehicles among Chinese consumers has waned due to aggressive price competition and rapid technological advancements by domestic rivals. Deliveries from Tesla’s Gigafactory 3 in February experienced significant declines, dropping 51.5 percent month-over-month and 49.2 percent year-over-year to 30,688 units. This marks the lowest delivery volume since July 2022.
Adding to the challenges, sales of Tesla’s Model 3 fell behind those of the SU7, a vehicle developed by smartphone maker Xiaomi, by a margin of 25,815 to 21,046 units in December. This shift has raised concerns about the competitiveness of Chinese-developed EVs in terms of style, performance, and technology.
“Tesla needs to launch new models or at least fine-tune its existing product line to retain its market share in China,” stated Zhao Zhen, a sales director at Shanghai-based dealer Wan Zhuo Auto. “A lower-priced Model Y could support sales as local rivals offer midsize intelligent EVs at prices just half those of Tesla’s vehicles.”
Tesla’s initial success in China was notable. In 2020, when the Gigafactory began operations, Tesla’s sales of approximately 180,000 vehicles accounted for over 16 percent of total EV sales nationwide. Last year, deliveries reached 657,000 units, representing a 6 percent market share. However, in February, that figure fell to 4.3 percent.
