SHANGHAI – Tesla is getting crushed in China, its most important market outside the United States and one that it had dominated for years.

When Ms Liu Jie, 32, decided to buy an electric car in October 2024, Tesla was one of her top choices. But after test-driving a few Chinese cars, she went with a sports sedan from Xiaomi, a consumer gadget maker better known for its smartphones, kettles and robot vacuums.

“Xiaomi is more fashionable,” Ms Liu said last week in Beijing. “Tesla, for me, it’s a little bit normal. You can see the Tesla Model Y everywhere.”

It is not personal, buyers said. Tesla is still considered a top brand, and Mr Elon Musk, Tesla’s CEO, is admired in China. Beijing rolled out the red carpet when he broke ground on the company’s first overseas factory in Shanghai. Mr Musk is credited with igniting China’s local electric vehicle industry.

But now that market is a blood bath of competition from Chinese rivals. Chinese drivers who once flocked to Tesla are turning more and more to local brands that offer more efficient cars with better technology, sometimes at half the price.

Tesla’s biggest rival, the electric car giant BYD, sold 481,318 cars in the first two months of 2025, over three-quarters more than it did over the same period in 2024. Tesla sold 60,480 vehicles in the first two months of the year, a drop of 14 per cent from 2024.

Tesla’s sales in China are plunging as the carmaker faces criticism over Mr Musk’s role as an aide to President Donald Trump in charge of cutting federal spending. Tesla lost nearly one-third of its value over the past month as investors shunned the stock.

The threat that BYD poses to Tesla in China has been building for years. BYD has sold around 1 million more cars each year for the past three years. The popularity of BYD has been driven in part by the fact that its cars are cheaper. It has helped that local governments sometimes steer business in the company’s direction.

But a property crisis and a broadly slowing consumer economy have hit households and badly dented people’s appetite to shop, making it hard for all carmakers. Th...