Once seen as a symbol of Sino-U.S. economic and trade cooperation, Tesla is now facing the double pressure of local competition and political risks. Tesla CEO and the world’s richest man, Elon Musk, is finding it increasingly challenging to navigate the Chinese market.
Tesla, a foreign brand, used to be an iconic presence in the Chinese electric vehicle market. The Tesla Shanghai Gigafactory established in 2019 became a symbol of Beijing’s openness to the outside world. Musk himself was considered an “exemplar of foreign investment” by Chinese state media for his quick investment deployment and low-key compliance with policies.
However, as reported by The Wall Street Journal, the lingering risk is that Tesla might gradually fall behind the domestic competitors it helped nurture. This scenario is now unfolding.
With the rapid expansion of Chinese domestic brands such as BYD, XPeng, Li Auto, and NIO, due to government subsidies for electric vehicles, Tesla’s market share is gradually eroding.
According to data from the China Passenger Car Association, BYD has nearly 30% of the overall NEV market share in May 2025, with its dual focus on BEV and PHEV models. Geely, Changan, and Wuling Baodun hold a combined high market position, with a total market share approaching 25%. Emerging forces such as Li Auto and XPeng collectively account for around 7% to 8%. Tesla’s market share has visibly declined, dropping out of the top five with a market share of around 4% and facing continued pressure in the Chinese market.
The article highlighted that American companies in China often experience brief prosperity followed by being left behind, especially once domestic competitors flourish and government officials start favoring local leading enterprises.
In the early 2000s, Motorola was pushed out of the market by Chinese local companies due to government pressure to share technology and adopt Huawei’s battery standards.
Apple, once the top-selling smartphone brand in China in 2023, has now fallen behind Huawei and Xiaomi due to factors such as lower-priced but popular features offered by the latter, restrictions imposed by government officials, and stimulus policies supporting local manufacturers.
Apart from market challenges, Elon Musk’s “geopolitical standing” is also evolving. Recent reports suggest that Beijing is gradually lessening its reliance on Musk for geopolitical influence and focusing more on supporting domestic companies.
In addition to market conditions, Tesla’s operations in China are being influenced by the strained U.S.-China relationship. From export controls to data security reviews and potential industrial policy adjustments, the risk costs for foreign companies are increasing. As a tech-intensive and data-dependent enterprise, Tesla is facing notable scrutiny and restrictions.
Currently, Tesla owners in China are required to park their vehicles outside specific areas, and instances of government agencies and military units prohibiting their entry are not uncommon. These policies reflect long-standing Chinese concerns regarding Tesla’s data storage and onboard cameras.
Musk’s relationship with China was once a rare bright spot in Sino-U.S. economic cooperation, but amid global electric vehicle competition and geopolitical shifts, this relationship is becoming increasingly complex and fragile.
“You should never underestimate Elon Musk and Tesla’s resilience,” remarked Michael Dunne, a former General Motors executive now running an automotive consulting firm. However, Musk may be aware that the success of multinational companies in China has a limit, prompting him to consider investments in places like India as a hedge against the growing challenges in the Chinese market.
For Musk, finding the balance of “making money in China without causing trouble” is becoming exceptionally challenging in ways previously unforeseen.