Tesla Knocked Off Top Spot in China: What the Rise of BYD Means for the Future of Cars

Tesla long dominated the global electric vehicle conversation—especially in China, the world's largest car market. But the narrative is shifting. A quiet yet decisive power transfer is underway, and the new champion of China's EV race isn't American.

Tesla's reputation for technological leadership now faces a stiff challenge from Chinese brands. On Tuesday, UBS released findings from its annual global EV adoption outlook, revealing that BYD has overtaken Elon Musk's company as the top choice for Chinese consumers.

BYD Surges Past Tesla in Chinese Market

Wang Chuanfu's carmaker, known for its expansive Dynasty and Ocean model lines, has surged to the front of the Chinese EV race. The UBS report states: 'BYD is now viewed as the technology leader, and Xiaomi a fast riser.'

Previously neck-and-neck with Tesla, BYD has now pulled decisively ahead, beating Musk's firm in Q1 vehicle sales. Recent price cuts across its entire lineup could widen the gap—unless Tesla follows suit.

Data from China's latest weekly EV sales suggest Tesla is continuing to lose market share into Q2.

Foreign Brands Struggle As Domestic Rivals Rise

While BYD leads, it isn't the only local player shaking up the field. Xiaomi, better known for mobile phones, has entered the EV race with promising momentum. Its new YU7 crossover marks only its second car, but analysts expect it to attract younger buyers.

In UBS's survey of 10,500 consumers, Tesla's popularity in China fell from 18% to 14%, putting it behind BYD and Xiaomi. Even when factoring in broader brand favourability, Chinese consumers increasingly prefer local marques. As the report noted, 'although they do favour Tesla over other foreign OEM brands.'

Europe Cools On Tesla, But The US Remains Loyal

In Europe, Tesla is also slipping. Consumers now lean more toward traditional luxury names like Audi and BMW. The only market where Tesla remains dominant is the US—48% of American EV buyers say they still consider a Tesla.

However, even this market shows signs of strain. UBS recorded a 9-point drop in Tesla's standing as the top fully electric option in the US, pointing to market saturation and a lack of diversity in Tesla's product lineup.

Investors Shrug Off EV Slump As AI Hype Builds

Despite signs of global decline, Tesla's stock remains resilient. For shareholders, EV sales have become a secondary concern. Much like Apple's iPod before the iPhone era, Tesla's cars are no longer seen as the core growth driver.

'We believe the core focus for investors is the AI revolution,' wrote Dan Ives, a Wedbush analyst who recently raised Tesla's price target from $350 to $500 (£259.88 to £371.26), citing optimism over the company's AI prospects.