Tesla's retail sales in China dropped by 66% in October, and its exports accounted for nearly 90%.

If we only look at the data released by the China Passenger Car Association (CPCA) in November, Tesla China's performance in October this year presents an almost contradictory picture.

In that month, the wholesale sales of Tesla Shanghai Gigafactory reached 67,829 units, a year-on-year increase of 10.3%. But breaking down this figure, domestic retail sales stood at only 8,817 units, plummeting 66% year on year, hitting the lowest monthly performance in China since July 2022. Meanwhile, 59,012 new vehicles were transported to ports for overseas shipment, accounting for 87% of the total wholesale volume. The export volume rose 66.3% year on year, hitting the highest export proportion since the factory was put into operation.

8,817 units in retail, 59,012 units in exports. Domestic retail accounts for only 13% of the total.

This extreme production-sales structure can be rationalized as "quarterly rhythm" at first glance. Tesla has long adhered to the delivery logic of "ramping up volume at the end of the quarter and prioritizing exports at the beginning of the quarter". As the first month of the fourth quarter, October usually allocates production capacity preferentially to overseas markets with longer delivery cycles. However, attributing the cause merely to production scheduling rhythm obviously underestimates the severity behind this set of data.

Extending the timeline, in October 2024, Tesla's retail sales in China reached 40,485 units; the figure dropped to 26,006 units in October 2025; and in October 2026, it shrank directly to 8,817 units. In three years, Tesla's October retail sales in China have dropped by nearly 80%. Even excluding the interference of the export cycle, in the first ten months of 2026, Tesla China's cumulative domestic retail sales reached 389,905 units, down 15% year on year; while in the same period, Shanghai Gigafactory's exports hit 420,984 units, skyrocketing 101% year on year.

In the first ten months of 2026, the cumulative export volume historically exceeded domestic sales. This set of data marks a clear turning point: Tesla in China is evolving from a "brand that sells cars to Chinese consumers" to an "export hub that relies on China's supply chain to support global operations".

"Loss of voice" in the domestic market: Overdrawn demand and aging vehicle models

The extreme shrinkage of domestic retail is first and foremost an inevitable result of the mismatch between product life cycle and market competition intensity.

In the October data, domestic retail sales of Model Y reached 7,807 units, and Model 3 only 1,010 units. This "dual-model strategy" that once dominated China's new energy vehicle market has shown obvious signs of fatigue. In September, to boost volume at the end of the quarter, Tesla carried out a wave of concentrated deliveries and promotions, which largely overdrawn the demand in October; but the deeper reason is that the iteration speed of domestic competitors has far outpaced Tesla's product renewal rhythm.

The 2026 Chinese new energy vehicle market is no longer the blue ocean lacking strong rivals when Model 3 and Model Y were first produced domestically. The continuous sales growth of Xiaomi SU7, the dense layout of ZEEKR and Lynk & Co in the 200,000-300,000 RMB price range, Huawei Harmony Intelligent Mobility's mindshare occupation in intelligent driving experience, and BYD's dimensionality reduction strike across all price bands have fragmented Tesla's core price segment.

The three-electric system, minimalist design and brand aura that Tesla once took pride in are rapidly losing their premium value in front of local Chinese brands that pursue extreme hardware configuration and are in the white-hot intelligent driving arms race. More critically, in 2026 when the price war is the most fierce, Tesla's gross margin per vehicle has dropped to a historically low range of 16%-17%, and it is no longer able to instantly boost sales through simple and crude price cuts of tens of thousands of RMB as it did in 2023. When the price cut weapon loses room for maneuver, and FSD (Full Self-Driving) has still not landed in China as of October 2026 with its progress delayed repeatedly, Tesla's domestic sales base can only shrink passively.

The overall market data provides a reference frame: in October, the retail sales of domestic new energy passenger vehicles fell 10% year on year, and the retail sales of the entire passenger vehicle market dropped by about 27%. Tesla's 66% year-on-year decline in retail sales in China far outpaces the drop of the overall new energy vehicle market. This indicates that the main cause of Tesla's sales decline is not weak macro consumption, but the loss of competitive advantage of its own products in the extremely involuted market.

Qualitative change of Shanghai Gigafactory: Breakwater for global profits

With sluggish domestic sales, what should be done with the production capacity? The answer is written in the export data of 59,012 units.

Shanghai Gigafactory is Tesla's most efficient super factory with the most extreme cost control across the globe. In Elon Musk's global layout, its role is undergoing a qualitative change: from satisfying China's huge domestic demand market to supporting Tesla's delivery gap in Europe, Asia-Pacific and even some North American markets.

In the first ten months of 2026, Shanghai Gigafactory's export volume increased by 101% year on year to 420,000 units. Behind this explosive growth is the dilemma of limited production capacity of other Tesla factories around the world. The expansion of Berlin Gigafactory has hit bottlenecks, and the production capacity ramp-up of Texas Gigafactory is slow, making Shanghai Gigafactory Tesla's most reliable and main "production capacity reservoir" across the globe.

From the perspective of business logic, this is a move that has to be taken. China has the world's most mature and lowest-cost new energy vehicle supply chain. Even with freight and tariffs added, vehicles produced by Shanghai Gigafactory still have extremely strong price competitiveness in overseas markets. When the domestic price war is extremely fierce and the profit per vehicle is infinitely diluted, exporting production capacity to European and Middle Eastern markets with relatively milder competition and higher profit margin per vehicle is Tesla's only choice to maintain its overall financial report performance.

This "domestic-for-export" adjustment maintains the capacity utilization rate of Shanghai Gigafactory in the short term, and also sustains Tesla's global delivery data. But for Tesla's China business, this is a substantial downgrade: China has largely changed from the largest end consumer market to the largest export manufacturing base. The marginal revenue of the huge domestic sales network, stores and charging infrastructure will keep declining as the proportion of sales shrinks.

Separation of valuation logic: The automotive business has become a "cash cow"

The market needs to adapt to this new normal of Tesla. Wall Street's pricing logic for Tesla has already undergone a fundamental shift.

If Tesla were just an automobile manufacturer, its valuation would be suppressed to a very low traditional manufacturing range based on current delivery data and profit margin. But the capital market is willing to give Tesla a premium far exceeding that of traditional automakers, and the core logic lies in the subscription potential of FSD, the commercialization prospect of Robotaxi, Optimus (humanoid robot) and Dojo supercomputer.

In Tesla's 2026 narrative, selling cars is no longer the top priority. The automotive business has been reduced to a base that provides "cash flow" to support Elon Musk's huge capital expenditure in the AI and robotics fields. As long as the decline in domestic sales does not affect the operation of overall cash flow, it will not cause much fluctuation in Wall Street's valuation models.

However, for China, the world's largest new energy vehicle market, Tesla's strategic retreat still has landmark significance. The evolution speed of local Chinese automakers in intelligence and supply chain integration capabilities has made Tesla, which once entered China as a "catfish", feel suffocated. Tesla's strategy in the domestic market has shifted from "active attack" to "defense and harvest", maintaining a low-altitude gliding state relying on remaining brand inertia, extremely low inventory pressure and export channels.

Conclusion

The 8,817 units of domestic retail is not a signal that Tesla China is heading for decline, but more like an active contraction based on global resource allocation.

Shanghai Gigafactory is still operating at full capacity, but the tires it manufactures are increasingly rolling on the roads of overseas markets. For Tesla, using China's strong supply chain to earn profits from the global market is a deal that could not be more cost-effective.

But the other side of this deal is that in China's intelligent driving market, where competition is the fiercest and technology iteration is the fastest across the globe, Tesla is being forced to give up its position at the mainstream table. While Elon Musk is focusing on space and robots, Chinese new energy automakers are redefining the rules of this industry with an iteration speed of tens of thousands of units sold per month. Tesla may still be one of the most profitable electric vehicle enterprises in the world, but in the Chinese market, the era when it could top the sales ranking as soon as it launched a new model has come to a complete end, along with the less than 9,000 units of retail data in October.

This article is from the WeChat Official Account "Tech Business", written by Luo Wei, and published with authorization from 36Kr.