The Electric: Homegrown Brands Challenge Tesla’s Lock on China’s Luxury EV Market

Today's column is by Dalibor Petkovic, a researcher specializing in Chinese industrial policies. Since 2017, he has focused on the Chinese EV market, as well as smart cities, urban logistics and battery recycling management. 

The emergence of electric vehicles in the past decade offered Chinese automakers—viewed as producing low-quality basic cars that sell for little profit—a chance to break into the more profitable luxury car market. Tesla beat them to the punch and now dominates the luxury EV market in China. Domestic manufacturers are scrambling to catch up, with little success so far. 

Tesla’s China sales exploded after it opened its Shanghai Gigafactory in October 2019, allowing the company to escape China’s 40% tariff on cars imported from the U.S. The price of an extended-range Model 3 dropped overnight to $45,600, from $64,000. Tesla’s China sales increased 161% in 2019 and doubled again in 2020. In the first half of this year, Tesla sold more than half of all EV luxury cars—defined as those that sell for more than $45,000—according to data from the China Passenger Car Association. Tesla’s Model Y was the best-selling luxury SUV in China, outpacing the Mercedes GLC and Audi Q5.