Tesla Elon Musk's once unassailable rise in China is finally starting to turn around, with Tesla's market share shrinking, Chinese rivals snapping up market share with autonomous driving and more, and geopolitical tensions blurring Musk's value to Beijing. After all those years of indulgent support by the Beijing regime, Tesla's standing in its second-largest market has become decidedly more precarious, the Wall Street Journal reported. From EV star to fading contender Story continues below Advertisement Remove Ad Local competitors such as XPeng and BYD have filled the vacuum, adding advanced semi-autonomous technology and even robotaxi operations. Tesla itself, just starting to offer robotaxis in the U.S., has no such role in China. A shrinking piece of a growing pie Tesla's electric vehicle market share in China has dropped from 11% in early 2021 to just 4% in May 2025 as Chinese EV sales exploded. BYD is on the verge of controlling 30% of the market. Xiaomi, newly entered into the market, already controls 3% with its SU7 model. Sales representatives point to intense pressure to sell daily quotas, and buyers complain about Teslas as being less exciting and more "iPhones" in nature—well designed but boring. Even a state-owned employer banned parking Teslas on its premises, citing data privacy concerns. Some consumers, like Qian Yang, have switched to domestic models that have more integration and smarter features. Self-driving setbacks Tesla's attempt to export its U.S.-trained FSD software to China has been running into wall after wall. Chinese regulators insist on domestic data training, and U.S. export controls on AI chips made it difficult for Tesla to set up an FSD training system within China. Even when Tesla agreed to censor sensitive video content, officials protested. Tesla subsequently offered a free trial of select FSD features, which led to the regulators cautioning that it shouldn't test Chinese drivers. Local firms, meanwhile, are capitalizing on Tesla's regulatory limbo by proceeding with their own autonomous products. Lessons from history—and a familiar pattern Tesla's challenges are echoed in the challenges that other US tech giants in China are facing. Motorola and Apple once controlled the Chinese consumer market, only to lose ground to local competitors. Like them, Tesla is finding that success in China can be fleeting. The Chinese administration initially embraced Tesla to accelerate local industry, as a "catfish" meant to stir stagnant waters. That succeeded. Tesla did indeed bring skill and scale, but Chinese business learned fast, replicated its innovations, and in numerous cases, outinnovated them. New battlegrounds: batteries and humanoid robots Musk's vision for Tesla extends beyond cars, into battery packs and humanoid robots. China is already looking ahead to this, as well. Tesla's Shanghai Megapack factory has begun exporting to Australia, but homegrown battery giant CATL is getting into the same game. In robotics, Tesla’s Optimus humanoid project depends on Chinese suppliers for critical parts. These suppliers are now helping domestic robot makers like Unitree and Agibot, potentially giving rise to the next generation of Chinese tech challengers. Musk himself acknowledges the risk. “I’m a little concerned that on the leaderboard, ranks two through 10 will be Chinese companies,” he recently told investors. End of the honeymoon The fall from Tesla's formerly China-preferred position is a turning point in the company's fortunes globally. Musk bet on China's economies of scale and low cost first, and he got away with it. But he never factored in the ability of Chinese competitors to catch up faster—and the willingness of Beijing to switch allegiances when Tesla had completed its assignment. The EV leader finds itself in a familiar position for many foreign companies in China these days: fighting to stay competitive in a market that once embraced it, but has long since moved on. MC World Desk