At first glance, Tesla is doing well in the world’s largest car market. Tesla China said its sales rose by 8.8% to more than 657,000 units in 2024. But the Elon Musk-run battery electric vehicle (BEV) maker, which reports its full-year 2024 financial results on January 29th, faces a suite of challenges. 

Tesla is clinging onto its title as the world’s largest EV maker by sales, but Chinese pure EV players and legacy automakers are in close pursuit. Slower than-expected demand in Western markets has weighed on its global sales and combined with fierce competition and regulations in China.

In 2024, Tesla’s global vehicle deliveries — a proxy for its sales — declined by 1.15% to 1.79 million units, the first annual drop since 2011. Tesla is yet to release granular data on sales by region in 2024, but GlobalData estimates Tesla BEV sales declined by 4.6% in North America and by 10% in Europe, making China the only major automotive region where the company’s sales grew in 2024.

‘Just an everyday car’

Tesla’s business in China, where strong growth propped up an otherwise sluggish global BEV market, is an indicator of wider woes for Western automakers. David Leah, senior analyst at CRU Group, says every EV market for all players is becoming more and more competitive, particularly in China. 

“We’re going to see more price wars, model launches and product updates,” he says, noting that Tesla is feeling the pressure from established EV brands like BYD and Xpeng, as well as new entrants such as Xiaomi. Tesla’s share of BEV sales in China dipped from 11.1% in 2023 to 10.3% in 2024, according to GlobalData. 

Part of the problem is that Tesla only has two mainstream models in China — the Model 3 and Model Y — compared to more than 40 models in BYD’s lineup. Tesla has said it will begin production on more affordable EV models in the first half of 2025, while its ‘Cybertruck’ is still only available in the US.

In the meantime, Chinese rival BYD almost surpassed Tesla with global EV sales of 1.76 million units last year, the majority made in its domestic market. When combined with its plug-in hybrid EVs sales, BYD sold a total of 4.27 million cars — a 40% increase on the year before and more than double Tesla’s haul. 

“Tesla is facing a serious risk, [even] an existential threat in China, because they aren’t considered as innovative as they used to be,” says Shaun Rein, managing director of China Market Research Group. “They’ve cut their price so much in order to compete with the Chinese that they’ve lost their luxury positioning and they’re now just an everyday car.” 

Challenging environment 

Mr Musk, understandably, sings a bullish tune. He told investors in October that “Tesla is profitable despite a very challenging automotive environment” and projected sales to grow by 20–30% in 2025. Analysts surveyed by FactSet expect more moderate year-on-year growth of 16% to 2.07 million vehicles.

It will be a challenge for Tesla to reach its growth projections, given that US president Donald Trump has pledged to roll back policies that help EV sales in the US. The ultimate impact of the closeness between Mr Trump and Mr Musk on Tesla’s bottom line and US–China relations remains to be seen. 

On the flipside, Mr Leah of CRU notes that “Tesla will benefit this year” in the EU due to carbon credit pooling. Automakers with higher emissions are collaborating with EV makers like Tesla in the EU by purchasing their surplus carbon credits to avoid paying fines for their emissions. Tesla is also taking the EU to court over its tariffs on its Chinese-made cars.

But the EV pioneer still faces an uphill battle in China itself. On January 24, China’s regulator said Tesla will fix software for more than 1.2 million of its cars over safety hazards. Tesla’s challenge to convince Chinese consumers to part with their money is getting harder with increasing EV choices.

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