BYD's hybrid popularity catches up to Tesla in China

• Tesla is falling behind in China as BYD's hybrids take off.
• Hybrid sales have helped to drive up overall plug-in sales in China this year.
• The results come amid a tough year for Tesla overall.

Tesla's sales are slipping in China in the latest sign of trouble for Elon Musk's car company.

Tesla's Shanghai factory shipped 68,280 Model 3s and Model Ys in October, down 5.3% from the same month in 2023, according to data released by the China Passenger Car Association on Monday.

Month-over-month results were even worse for Tesla, with sales falling 23% from September to October.

Meanwhile, EV competitors in the region, like BYD, posted record sales results in October, and the plug-in market overall in China is gearing up for a year-end boom.

Plug-in sales in China (which include hybrid models) increased nearly 51% in October compared to last year, and the segment accounted for more than half of all car sales in China last month.

Two compounding issues are driving Tesla's lackluster performance in the world's largest automotive market: increased demand for hybrids and an aging lineup compared to flashy new entries.

While Tesla continues to focus on battery-powered vehicles solely, BYD has grown its market share in China with popular hybrid offerings. These vehicles, which offer an alternative for green-car shoppers who aren't ready to go fully electric, have gained in popularity in the past year.

This has helped propel BYD's record-breaking year. The company recently surpassed Tesla in quarterly revenue for the first time, and reported a 66% increase in sales last month with 500,526 units. More than 300,000 of those sales were plug-in hybrids.

Musk has criticized his competitors for relying on hybrid sales as demand for battery-electric cars hits a plateau. At an earnings reporter earlier this year, Musk blamed a focus on hybrids for eating into Tesla's sales.

BYD also has a newer lineup than Tesla, which still sells the aging Model 3 and Model Y in the region. BYD's vehicles have more updated styling and also come in a wider range of body styles and price points than Tesla's.

While price cuts worked for a while to maintain Tesla's volumes in China, BYD has been able to beat Musk at his own game, waging a price war that has also created a headache for other US car companies in the region.