Hit Hard in the U.S., Tesla Faces Another Blow in China

On March 10, 2025, Tesla’s stock price plummeted by 15%, erasing over $800 billion from its market value. This drop closely tracks a decline in global sales. In the U.S., the slump might stem from Elon Musk’s “technical support” offered to the White House, which has alienated many consumers and investors. In China, however, Tesla’s February 2025 sales fell 49% year-over-year, likely due to the rise of a new Chinese EV brand—Xiaomi.

Tesla’s stock price plummeted by 15% on March 10

When choosing cars, consumers weigh three key factors: price, performance, and brand value. In China, Tesla’s edge in all three is fading fast.

First, price has long been Tesla’s Achilles’ heel in the Chinese market. Chinese buyers tend to favor domestic brands like BYD, which offer lower prices and cheaper maintenance. Tesla’s strength in China lies in the mid-to-high-end electric car segment, but the launch of Xiaomi’s SU7 series has rendered its price-to-performance ratio uncompetitive.

When Xiaomi unveiled the SU7 Ultra in 2024, it debuted at a cautious $110,000, positioned to challenge Tesla’s “fastest production car,” the Model S Plaid. Late last year, the SU7 Ultra’s prototype had clocked a record-breaking 6 minutes 46 seconds around the Nürburgring as the fastest four-door electric car—39 seconds ahead of the Model S Plaid’s 7 minutes 25 seconds.

Xiaomi’s official specs for the SU7 Ultra list 1,548 horsepower, a 0-to-100 km/h sprint in 1.98 seconds, and a top speed of 350 km/h—rivaling China’s high-speed trains. When the car was officially released on February 27, 2024, its price dropped to $73,000. By comparison, the Model S Plaid offers 1,020 horsepower and a top speed of 322 km/h. With Tesla trailing Xiaomi in performance yet costing $40,000 more, only diehard Tesla fans are likely to stay loyal.

Tesla Model S Plaid (top), Xiaomi SU7 Ultra (bottom)

Worse still, Tesla’s brand value in China is crumbling, too.

In China, Tesla’s brand rests on two pillars: Elon Musk’s personal charisma and a mystique of “innovation.” The perception that Tesla leads the industry in cutting-edge technology, especially autonomous driving, has won it many followers. Unlike Chinese manufacturers, who blend cameras with LiDAR, Tesla’s pure vision-based Full Self-Driving (FSD) system showcases its robust onboard AI and computing power—or so the narrative goes.

Tesla first unveiled this technology in the United States in 2021. The impressive performances showcased in online videos had many Chinese Tesla fans eagerly anticipating it, believing it to be far more advanced than technologies from other brands. However, when the Full Self-Driving (FSD) system was officially deployed in Tesla vehicles sold in China on February 25, 2025, the results proved deeply disappointing. The system frequently made illegal lane changes and even ran red lights during autonomous driving. Chen Zhen, a prominent auto review blogger, claimed that Tesla’s unreliable FSD caused him to commit seven traffic violations within just two hours, resulting in 18 penalty points deducted from his driver’s license—notably, Chinese driving licenses carry a maximum of only 12 points. This forced him to pay substantial fines and mandated that he return to driving school to relearn driving from scratch.

Chinese automotive blogger Chen Zhen shared on social media the fines he received in one night while using FSD to drive his Tesla.

In response to the controversy, Tesla’s PR team explained that‘s not because the flawed algorisms, but due to China’s vastly more complex traffic regulations. In reality, FSD isn’t a technological leap but a cost-cutting compromise.

In autonomous driving, LiDAR boosts reliability by measuring distances with centimeter- or millimeter-level precision in any lighting. Vision-only systems, reliant on AI’s real-time processing, are vulnerable to visual spoofing—public tests have shown AI mistaking celebrity billboards for pedestrians or misreading color blocks as traffic signals. LiDAR-equipped systems can easily handle such situations, while a pure vision setup, without constant human oversight, poses serious safety risks. Picture driving a 1,000-horsepower car on autopilot while second-guessing the AI’s every move. If a driver has that skill, why not race F1 instead of babysitting a sedan?

This explains why most Chinese automakers prioritize LiDAR for safety—the ultimate luxury.

Cost differences between LiDAR in China and the U.S. are stark. Per Yole Group’s 2024 report, Chinese firms dominate 84% of the global LiDAR market, driving procurement costs below $500, while U.S. automakers pay around $1,000. Tesla’s FSD, using eight cameras and AI, saves Musk nearly $500 per vehicle—a shrewd move, but one that sacrifices robustness.

Cost is only half the battle. American manufacturers also face a technological gap. China’s Hesai Technology, with its AT128 LiDAR, achieves a scanning density of 1.53 million points per second—far outpacing the 600,000 points per second of U.S. company Luminar’s flagship product, Hydra. Hesai’s annual output exceeds 500,000 units, dwarfing Luminar’s global production of under 150,000. In 2023, Biden administration sanctions on Hesai, citing “technical security,” cut off U.S. chips and optics, shuttering its North American plant. Paradoxically, this turbocharged China’s domestic LiDAR industry, leaving U.S. carmakers with pricier, less capable components.

Hesai’s AT128 LiDAR

Notably, Xiaomi’s SU7 uses Hesai’s AT128 LiDAR, bolstering consumer trust in its autonomous driving while maximizing motor performance.

When Tesla opted to cut corners, consumers bore the cost. China once trailed the auto industry, eager to pay premiums for mature tech and established brands from the U.S., Europe, and Japan. In the EV era, the tables have turned. Without a stronger case, Tesla won’t sway Chinese buyers.

Editor: Li Jingyi