Tesla’s sales in China fell to a three-year low in October, raising concerns that the electric vehicle giant could experience its first full-year decline in the country.

The U.S. automaker sold 26,006 vehicles last month, a sharp drop from September, as its market share fell from 8.7% to 3.2%. Analysts point to fierce competition from local EV makers such as NIO, Li Auto, Xiaomi, and Leapmotor, alongside a price war in a slowing economy.

Michael Dunne, CEO of Dunne Insights, said, “Tesla is getting surrounded by a swarm of Chinese automakers — from above, below, left and right… each is taking some sales from the company with a target on its back.”

Rising Local Rivals

• Xiaomi: The tech giant’s YU7 SUV and SU7 sedan posted record sales in October, with nearly 109,000 units sold in Q3, turning a profit for the first time.
• Leapmotor: Founded in 2015, the startup’s C10 SUV is priced at roughly half of a Tesla Model Y, benefiting from in-house production and a joint venture with Stellantis.
• Geely Geome Xingyuan: Leading EV sales in China’s budget segment, priced below $10,000, showing growing demand for affordable, value-driven EVs.
• Huawei: Partnering with traditional automakers like Seres, Chery, and Beijing Auto, its Aito M8 SUV has become a notable high-end competitor.

Despite these challenges, Tesla’s Model Y remains the 6th best-selling EV in the Chinese market. At Tesla’s recent annual meeting, Elon Musk said the company expects China to approve Full-Self Driving software by early 2026.

Analysts’ Take

Analysts emphasize that model updates and innovation are crucial for Tesla to stay competitive. Tu Le, founder of Sino Auto Insights, said, “Reality is catching up to Tesla in China… not keeping up with Xiaomi, BYD, and XPeng seems to be finally showing in its monthly sales.”

Tesla’s Q3 global revenue increased 12% year-on-year to $28.10 billion, but sales in Europe continue to slump amid growing competition from Volkswagen, BYD, and other EV makers.

Outlook

With 2026 shaping up as a pivotal year, Tesla must refresh its models and maintain innovation to defend its position in the world’s most competitive EV market.