Tesla’s factory in Shanghai recorded higher shipments in September, marking a strategic turn for the company in the world’s most competitive electric vehicle market.

The rebound comes as China’s auto industry enters its busiest season, with major manufacturers vying to meet year-end targets while navigating government warnings against excessive price cuts.

Bloomberg reports that according to preliminary data from the China Passenger Car Association (PCA), Tesla shipped 90,812 vehicles from its Shanghai facility last month, up 2.8% from a year earlier.

Although exports and domestic sales are not separated in the figures, the majority of deliveries were made to Chinese buyers, signalling growing local demand ahead of the Golden Week holiday at the start of October.

Domestic momentum returns amid tighter competition

The September increase breaks Tesla’s months-long trend of declining wholesale output from its Shanghai factory, which had fallen in seven of the previous nine months.

The improved figure also follows a strong third quarter globally, with record deliveries as US consumers rushed to take advantage of electric vehicle tax credits before their expiration on September 30.

Tesla’s latest move to deliver a six-seat version of its Model Y sport utility vehicle further suggests a pivot towards family buyers — a fast-growing segment in China’s urban markets.

The introduction of new variants could help the automaker strengthen its foothold at a time when domestic brands such as BYD Co. have expanded aggressively across all price ranges.

BYD sees rare decline as policy pressure grows

While Tesla enjoyed a rebound, China’s best-selling carmaker BYD reported its first year-on-year sales decline in more than 18 months. The Shenzhen-based firm’s deliveries fell 1.3% for the third quarter, marking its first dip since 2020.

Despite this, BYD continues to lead Tesla in the pure electric vehicle segment and has outsold the US company for four consecutive quarters.

The shift highlights the evolution of China’s electric vehicle landscape.

After years of expansion driven by generous subsidies and rapid innovation, the sector is now adjusting to tighter regulation and slowing consumer demand.

The Chinese government has urged automakers to avoid what it calls “unhealthy competition,” referring to the ongoing price war that has driven down margins and forced smaller brands to the brink.

Beijing’s caution over discounting and quality

Beijing has asked manufacturers to curb unreasonable price cuts and ensure faster payments to suppliers and dealers, amid fears that aggressive pricing could compromise vehicle quality.

The campaign comes after a series of safety complaints and quality-control concerns linked to intense competition among smaller producers.

For Tesla, this policy shift could offer breathing space. Having resisted major price cuts in recent months, the company may benefit from an environment that discourages discounting.

However, as China’s economy continues to slow and consumer sentiment remains fragile, automakers may struggle to meet sales targets without incentives.

Market share battle intensifies ahead of year-end

China’s total sales of electric and hybrid vehicles reached about 1.5 million in September, up 22% from a year earlier, according to PCA data.

The strong monthly performance underscores the scale of competition as the year draws to a close.

For Tesla, which relies heavily on the Shanghai plant as its global export hub, maintaining stable output is key to offsetting weaker markets elsewhere.

Its success in China’s fourth quarter could determine whether it meets full-year global delivery expectations amid softening demand in Europe and the US.

As local rivals innovate rapidly and expand beyond mainland borders, Tesla faces a delicate balance — sustaining profit margins while adapting to evolving consumer preferences in the world’s largest EV market.

The September figures hint at renewed domestic strength, but the months ahead will test whether this momentum can last without deep discounts.

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