China's electric vehicle (EV) market is experiencing a significant slowdown in 2025, marked by declining domestic sales and a deepening price war, even as its automakers accelerate a global expansion that is reshaping the industry's leadership. Data from the China Passenger Car Association shows weakening sales momentum through most of the year. Tesla's China sales fell 7.4% year-on-year between January and November, while market leader BYD reported a 5.1% decline over the same period. BYD's slowdown was particularly sharp in November, with passenger car sales dropping 26.5% from a year earlier.
The domestic market is becoming increasingly concentrated and competitive. The top 10 manufacturers now account for around 95% of China's new energy vehicle market, up from 60-70% just two to three years ago, according to Citic CLSA. While established players like BYD and Tesla see declines, newer tech-driven entrants like models powered by Huawei software and vehicles from Xiaomi recorded sales increases of over 90% in November.
An aggressive price war, expected to continue "for years" according to UBS analyst Paul Gong, is defining the market. Discounts are severe, with platforms like Autohome listing cuts such as 432,000 yuan on a Mercedes-Benz EQS EV. Policy changes are also expected to dampen growth; Beijing plans to re-impose a purchase tax and scale back trade-in subsidies in 2026. UBS forecasts China's EV sales growth rate could roughly halve next year from around 20% in 2025.
In response to slowing domestic demand, Chinese automakers are aggressively expanding overseas, where margins are often higher. China exported nearly 200,000 EVs in November, an 87% year-on-year increase. Mexico emerged as the largest single destination, with shipments skyrocketing 2,367%. Geely reported its EV exports quadrupled in the first half of the year, and BYD exported over 131,000 cars in November alone, with a new factory in Hungary set to ramp up in 2026.
This global push is propelling BYD to the forefront of the industry. By the end of November 2025, BYD had sold 2.07 million electric vehicles globally (including hybrids), compared to Tesla's 1.22 million units sold by the end of September. Analysts expect Tesla's full-year 2025 sales to be around 1.65 million, down 7.7% from the prior year, cementing BYD's position as the new global EV sales leader.
Tesla is facing challenges in key markets. In Europe, new Tesla registrations in the EU fell to 12,130 in November (down from 18,430 a year earlier), shrinking its market share from 2.1% to 1.4%. In contrast, BYD's registrations in Europe nearly tripled. Deutsche Bank projects a difficult fourth quarter for Tesla, with sales declines of around one-third in North America and Europe.
