Tesla Continues To Lose Market Share in Europe As BYD Races Ahead

Tesla (NYSE: TSLA), once the undisputed leader of the European electric vehicle (EV) market, is experiencing a sharp and sustained sales decline in the region. Recent data from the European Automobile Manufacturers’ Association (ACEA) paints a grim picture, with sales in the European Union (EU) plunging 40% in July, marking the seventh consecutive month of decreases.

This downturn is particularly alarming as it runs contrary to the overall European EV market, which saw a robust 39% surge in the same period. This dramatic reversal of fortunes is the result of a convergence of factors, including intense competition, brand image issues, and an aging product lineup.

Tesla Faces Intense Competition in Europe

The most significant headwind for Tesla in Europe is the rapidly evolving competitive landscape. The market is no longer a two-horse race between Tesla and a few legacy automakers. European brands like Volkswagen, Skoda, and Renault are aggressively launching new EV models, often with competitive pricing and a strong dealer network that Tesla lacks.

However, the most formidable challenge comes from Chinese manufacturers, particularly BYD. BYD’s strategy of offering a wide range of competitively priced, high-quality models has paid off handsomely. While Tesla’s sales plummeted, BYD’s registrations in Europe soared by 225% in July alone to 13,503 units, which is well ahead of Tesla’s 8,837 units.

Chinese brands collectively now hold a significant and growing market share in Europe, posing a serious threat to Tesla’s dominance.

BYD Surpasses Tesla in Europe

Tesla has been in Europe for quite some time now and even has a Gigafactory in Germany. BYD, on the other hand, officially entered the European market in 2022 and has now surpassed Tesla’s sales, despite facing tariffs in the EU.

Notably, BYD surpassed Tesla’s total sales in 2022, even as the US EV giant retained the title of the biggest seller of battery electric vehicles (BEVs). It hit yet another milestone when its 2024 revenues surpassed those of Tesla. BYD’s annual revenues rose 29% YoY to $107 billion last year, while Tesla’s revenues were around $97.7 billion. The steep rise in BYD’s sales was led by a record 4.27 million deliveries, which was well ahead of Tesla, which reported a YoY fall in its 2024 deliveries – the first in the company’s history. The sales decline has worsened in the first half of the year, with Tesla’s shipments down in double digits.

BYD Looks Set to become Biggest EV Seller in 2025

BYD, meanwhile, has continued its strong growth trajectory, selling more BEVs than Tesla in the first six months of the year. Looking at the strong growth in the first six months of the year, BYD looks set to become the world’s biggest seller of BEVs in 2025 and hit yet another milestone.

Notably, in 2011, Tesla CEO Elon Musk laughed at the possibility of BYD becoming a competitor to Tesla. However, the Chinese company has proven critics wrong and has emerged as a serious competitor to Tesla, not only in China but also in global markets.

Musk, too, has changed his mind about BYD, and in 2023, he praised the company, terming it “highly competitive.”

Musk has been all praise for Chinese EV companies and, during Tesla’s Q4 2023 earnings call, said, “Frankly, I think, if there are not trade barriers established, they will pretty much demolish most other companies in the world.”

The billionaire added, “The Chinese car companies are the most competitive car companies in the world. So, I think they will have significant success outside of China depending on what kind of tariffs or trade barriers are established.”

TSLA’s Vehicle Business Is Facing a Slowdown

While CEO Elon Musk has been trying to steer Tesla from an EV company to a tech giant focusing on artificial intelligence, robotics, and humanoids, the company’s core automotive business has been facing several challenges.

The Tesla CEO has warned of a few “rough quarters” ahead as the One Big Beautiful Bill Act does away with the EV tax credit, which could hurt sales. While the company’s US sales might get a boost in Q3 as buyers rush to claim the EV tax credit, its global sales could be subdued in the quarter, looking at the data from Europe and China.

Musk’s Politics Is Hurting TSLA

Along with the slowing growth in the EV industry and rising competition, Musk’s political activities are also hurting Tesla, particularly in the US and Europe. The Cybertruck is a case in point here, as the model’s unique shape made it the target of those protesting against Musk.

Musk’s embrace of right-wing parties in Europe has also alienated some buyers. Protests and public backlash in several European cities, coupled with concerns over his political endorsements, have created a reputational headwind that is proving difficult to overcome. In a market where consumers are increasingly conscious of corporate values and social responsibility, Musk’s actions appear to be directly impacting the brand’s appeal.

In a related incident, earlier this year, 10 drivers in Paris filed a lawsuit against Tesla, alleging that the perception about its cars becoming political symbols “prevents them from fully enjoying their car.”

Patrick Klugman, one of the lawyers working on the case, told Agence France-Presse, “The situation is both unexpected and impossible for French Tesla owners.” He added, “We believe that Mr Musk owes these buyers the peaceful possession of the thing sold.”

Tesla Has an Aging Product Lineup

An aging portfolio is also adding to Tesla’s woes. For years, the Tesla Model Y and Model 3 have been the company’s workhorses, but a lack of significant refreshes has left them vulnerable. While other automakers are consistently introducing new and updated models, Tesla’s core offerings have remained largely unchanged.

This makes it difficult for the company to compete with the novelty and features of new vehicles from rivals, particularly those from China that are arriving with the latest battery and technology advancements. Tesla has announced plans for a more affordable EV, but with volume production not expected until the latter half of 2025, the company is playing a difficult game of catch-up.

Also, its Cybertruck has failed to reach scale, and its sales volumes are a tiny fraction of the 250,000 units that Musk once said the company could sell this year.