Despite increased competition from BYD, analysts predict Tesla (TSLA.O) to set another record quarter in China.
China Merchants Bank International Securities analyst Shi Ji expects the U.S. automaker to sell 155,000 cars in China from April to June, up 13% from its record first quarter.
Shi said BYD and Aion, Guangzhou Automobile Group’s (601238. SS) EV band, gained market share, while Tesla’s share decreased to 13.7% from 16% in the first three months.
Deutsche Bank predicted 153,000 Tesla sales in China and 448,000 globally in the second quarter.
“Tesla has to sell into China’s lower tiered cities to seek further growth, but its direct sales model would be too costly to expand its sales network into hundreds of such cities,” said Yale Zhang, managing director at Shanghai-based consultancy Automotive Foresight.
“BYD, on the other hand, has a big advantage in those markets with dealerships,” he added. Tesla will publish global and China sales from association data this weekend.
Tesla’s second-largest market is China. At the start of the year, it slashed prices for two older models to compete with BYD.
BYD increased its lead with cars under 300,000 yuan ($41,500) while smaller EV players like Nio (9866. HK) and Xpeng (9868. HK) saw China sales dip.
BYD is overtaking Tesla outside China as exports grow. Singapore and Australia outsold Tesla in May. Tesla will improve Model 3 and Model Y sales. It wants Chinese regulator approval for its advanced autonomous driving software. Tesla sells automobiles built in China, Thailand, and Malaysia.