Brain drain, siege by friends, Tesla's 'internal and external troubles” after sales decline

Tesla

Tesla's sales in many major markets around the world are experiencing a steep decline. The latest data shows that its delivery volume in the Chinese market in October was only 26,006 vehicles, a sharp decrease of 35.8% year-on-year, setting a record low in the past three years. At the same time, Tesla’s share of China’s new energy vehicle market also plummeted to 3.2% from 8.7% in the same period last year, a decrease of more than 60%.

Tesla Model Y

Not only is the Chinese market under pressure, but Europe's performance is also dismal. In Sweden, Tesla's October sales plummeted 89% year-on-year; Denmark dropped 86%; Norway also recorded a 50% drop. "European consumers now have an unprecedented variety of choices - whether it is traditional luxury brands or rapidly rising Chinese electric car companies, Tesla no longer has the appeal it once had." Ginnie Buckley, CEO of the Electrifying platform, pointed out.

Internal dilemma emerges

Behind the decline in sales are Tesla's increasingly prominent internal problems, the first of which is slow product updates. Industry observers said: "Tesla's lack of locally adapted product lines and the slowdown in the pace of innovation are gradually losing its competitiveness in the European market." Currently, the company's main sales focus is still on Model 3, Model Y and their slightly modified versions. The much-watched Cybertruck saw a sharp 63% year-on-year decline in registrations in the third quarter of the United States, and has been recalled multiple times due to issues such as peeling off trim panels and loose light bars. In Europe, consumers prefer compact models with affordable prices, but Tesla has yet to launch corresponding products to meet demand.

Brain drain further exacerbates the management crisis. Recently, Siddhant Awasthi, the core person in charge of the Cybertruck project (who led the entire process of the model from research and development to mass production) and Model Y project manager Emmanuel Lamacchia have resigned one after another, leaving key positions vacant. In addition, many senior executives, including former vice president of software David Lau and senior engineers in the battery and robotics departments, have also left one after another. Currently, only Musk and Zhu Xiaotong are left in the core management to support the situation. It is worth mentioning that after the original person in charge of the Optimus humanoid robot resigned, the related projects have suspended production and entered the redesign stage. The original goal of mass production of 5,000 units this year has failed.

Musk

At the same time, Musk's frequent controversial remarks and public support for far-right political parties have also affected the brand image to a certain extent, especially in the European market that pays attention to social values, triggering consumer resistance.

external competition encirclement and suppression

Internal worries remain unresolved, while external threats intensify. China's local new energy brands represented by Xiaomi, BYD, NIO, and Xpeng are forming a comprehensive encirclement of Tesla.

In October, Tesla's market share in China plummeted to 3.2% from 8.7% in September, meaning that it lost more than half of its position within a month. In sharp contrast to this, Xiaomi Motors achieved sales of 48,654 vehicles that month with its SU7 and YU7 models, nearly twice Tesla's sales in the same period. Macroscopic data shows that the total sales of China's new energy vehicle market in October reached 1.282 million vehicles, a year-on-year increase of 7.3%. However, Tesla bucked the trend and fell sharply, reflecting that its market competitiveness is accelerating its decline.

Technical advantages are also being quickly erased. The smart labels that once led the industry are gradually fading. In recent years, domestic car companies have made rapid progress in the field of intelligent driving, but Tesla's FSD (fully autonomous driving) system has performed poorly in China's complex and changeable road environment. A Shanghai car owner's live broadcast showed that the FSD system even crossed the bus lane markings.

In comparison, domestic manufacturers adopt a more pragmatic strategy of "hardware redundancy and high-aware fusion". For example, the new Inquiry M7 is equipped with a total of 30 sensors, including 1 forward-facing lidar, 3 distributed 4D millimeter-wave radars, and 1 backward-facing solid-state lidar, to support Huawei's ADS 4.0 high-end assisted driving system; Ji Krypton's "Thousand Miles of Vast" solution is equipped with up to 5 lidars.

Brand new Wenjie M7

In the dual game of price and configuration, Chinese brands continue to take the initiative. Through the combination of "high configuration and low price", Tesla's living space is continuously reduced. While Model 3 and Model Y have not undergone substantial upgrades since 2019, rivals such as BYD, Xiaomi, and NIO have already completed multiple rounds of iterations and formed a dense product matrix. The minimalist design concept and high premium model that Tesla was once proud of are gradually losing their effectiveness in the face of increasingly rational Chinese consumers.

Overall, the external challenges faced by Tesla are systemic and comprehensive. Domestic electric vehicle companies have not only built a tight network in terms of product layout, technical routes, and pricing strategies, but also firmly grasp user needs by virtue of their deep localization advantages.

The road to self-rescue and breakthrough

Facing the severe situation, Tesla is trying to turn the tide through various means. The most direct way is to significantly reduce prices. In the British market, Tesla offers discounts of up to 40% to leasing companies. Although it can digest inventory in the short term, it may also damage brand value and profitability.

In China, Tesla continues its aggressive pricing strategy. On September 1, the price of the Model 3 long-range version, which has been on the market for less than a month, was reduced from 269,500 yuan to 259,500 yuan, a drop of 10,000 yuan. Although this "downgrade as soon as it is launched" approach was dissatisfied by early car owners and weakened the brand's credibility, Tesla seems to have regarded it as a necessary price to maintain the scale of orders. According to statistics, throughout 2025, the cumulative price reductions of Model 3 and Model Y have reached 10%-14%. However, the cost is significant: Tesla's gross profit margin for cars in the Chinese market has dropped to 16.3% in the second quarter of 2025.

Tesla Model 3

In addition to the price war, Tesla is promoting a "double-pronged" product strategy to cover a wider range of consumer groups.

In order to cater to the needs of Chinese family users for large space and to face popular six-seat SUVs such as the Lili L9 and Wenjie M9, Tesla will exclusively launch Model YL (long wheelbase version) in China in the fall of 2025. The length of this model has been increased to 4976 mm, the wheelbase has been extended by 150 mm to 3040 mm, and a third row of seats has been added. The starting price is 339,000 yuan. As of October, its production capacity has been booked, and delivery has to be queued until November, which initially shows market enthusiasm. In addition, Tesla recently quietly launched the Model Y long-range rear-wheel drive version. It is said that the sales volume in Beijing alone on a Saturday was close to 400 units. The national single-day sales volume is equivalent to the output of the Shanghai Gigafactory in three weeks.

It is reported that Tesla is also secretly developing the "economical Model Y" code-named E41, which is scheduled to be put into production at the Shanghai factory in 2026. This model will reduce manufacturing costs by about 20% through simplified configurations and other methods. The potential starting price is expected to drop to about 210,000 yuan, aiming to enter the mainstream household market.

Conclusion

Tesla is going through the most difficult period in its development history. This pioneer who once subverted the global automobile industry is now facing an unprecedented impact in the world's largest automobile market. From weak product innovation and the flight of core talents to fierce market competition and the breakdown of technical barriers, Tesla's "internal and external troubles" have become an airtight web of dilemmas.

Behind this, it reflects the overall rise of China's automobile industry. From being followers at the beginning, to now achieving parity or even leadership in many fields, Chinese brands have completely reshaped the competition rules of new energy vehicles by relying on faster product iterations and deeper user insights.

In the future, if Tesla wants to regain its growth momentum, it will not only need to adjust its product strategy, but also fundamentally change its understanding of the Chinese market and its operating methods.

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