Sales of Tesla’s electric vehicles (EVs) in China surged 3% in August compared to the previous year. While the automaker continues to make strides in the Chinese market, Tesla’s share of the U.S. EV market dipped below 50% last quarter—a stark reminder of how the West lags behind China in the electric vehicle race.
This contrast shines a light on the differing trajectories of the EV industries in China and the West, with China pulling ahead thanks to aggressive policies and robust infrastructure investments.
China’s Subsidies Fuel EV Growth
One of the key factors behind China’s electric vehicle dominance is its government’s heavy subsidies and tax incentives, which have made EVs more accessible to a broader range of consumers. The Chinese government has long provided direct cash subsidies, helping to lower the initial cost of purchasing an EV. These incentives have been instrumental in driving China’s EV market growth, positioning it ahead of global competitors.
In contrast, affordability remains a significant barrier to EV adoption in the U.S. and Europe. The average price of a new electric vehicle in the U.S. hovers around $60,000, making EVs a less appealing option for many consumers. Julia Martinez, an energy and automotive analyst at Morning Consult, noted in a 2023 report: “While consumers still have plenty of concerns surrounding an EV’s battery range, price remains the higher priority when purchasing an EV.”
China’s rapid expansion of its charging infrastructure further strengthens its EV lead. With a nationwide network of public charging stations, China has created an ecosystem that makes owning an EV convenient and practical. As of May 2024, China boasted nearly 10 million public charging stations—a 56% increase from the previous year—solidifying its status as the world’s largest EV charging network.
The U.S., however, faces significant challenges in this area. A study by Harvard Business School revealed that one in five U.S. public EV chargers are unreliable, with a reliability score of just 78%. This unreliability has led to widespread “charge anxiety” among EV drivers, a fear that their vehicle might run out of power due to malfunctioning or inadequate charging infrastructure.
Omar Asensio, the lead researcher of the Harvard study, emphasized that EV stations in the U.S. are less dependable than traditional fuel stations, compounding the issues faced by American EV owners.
Tesla’s Declining U.S. Market Share
While Tesla continues to grow in China, the company’s hold on the U.S. EV market is weakening. For the first time since launching its Model S in 2012, Tesla’s market share in the U.S. dropped below 50% in the second quarter of 2024. This decrease was accompanied by a 6.3% decline in U.S. sales over the same period.
Tesla’s workforce cuts may have played a role in this downturn. In April, CEO Elon Musk announced plans to cut 10% of Tesla’s global workforce, affecting around 14,000 employees. Musk cited cost reductions and overlapping roles as the primary reasons for the layoffs.
The Path Forward
As Tesla’s position in the U.S. weakens, its performance in China showcases the power of government support and infrastructure investment in accelerating the adoption of electric vehicles. The West’s ability to close the gap with China will likely depend on addressing issues like affordability and charging infrastructure, ensuring that EVs are not just a luxury but a practical option for all consumers.
