Why Is BYD More Popular Than Tesla in Europe?

Europe has been experiencing a decisive shift in its car market for a few years. According to the European Automobile Manufacturers’ Association (ACEA), the first seven months of 2025 saw 1,011,903 new battery-electric vehicles (BEVs) registered, giving them a 15.6% share of the EU market. Three of the four largest EU markets—Germany (+38.4%), Belgium (+17.6%), and the Netherlands (+6.5%)—led this growth, together accounting for more than 60% of total BEV registrations.

Hybrid-electric cars remain even more popular. They captured 34.7% of the EU market, driven by strong double-digit growth in France (+30.5%), Spain (+30.2%), Germany (+10.7%), and Italy (+9.4%). The July 2025 year-on-year data confirmed the momentum: BEV sales jumped 39.1%, while hybrid sales rose 14.3%.

But beneath these strong sector-wide figures lies a striking divergence among car manufacturers. Tesla’s European sales are falling sharply, while Chinese rival BYD is expanding at breakneck speed. In July alone, Tesla registered just 8,837 vehicles, down 40% year-on-year, while BYD sold 13,503 units, up 225%.

This divergence raises a question for investors and traders: why is Tesla struggling while BYD is gaining ground in Europe’s fast-growing EV market?

Why Tesla’s European Sales Slump Has Continued

Tesla, once synonymous with electric cars in Europe, has now lost market share for seven consecutive months, despite overall EV sales climbing. July’s 40% year-on-year drop was even worse than the 33% decline recorded across January to July 2025. Let’s cover some factors explaining this ongoing slump:

1. Reputational and Political Backlash

Tesla’s brand has been weighed down by CEO Elon Musk’s controversial political views. His proximity to Donald Trump during his second White House term, followed by a very public break-up, has created turbulence.

European consumers, who generally favor climate-focused and politically neutral brands, appear to be reacting negatively. For many buyers, Musk’s rhetoric has made Tesla less appealing, even as its cars remain technically competitive.

From an investor standpoint, reputational risks have tangible costs: brand equity is eroding, which makes Tesla more vulnerable to aggressive competition.

2. Rising Competition from China and Europe

The European EV market has become much more crowded since Tesla’s heyday. Chinese brands, led by BYD, commanded over 5% of the European market share in the first hald of the year, according to JATO Dynamics—a record high. BYD alone represented 1.1% of the EU market in July, compared with Tesla’s 0.7%.

Meanwhile, European incumbents such as Volkswagen, Renault, and Stellantis have accelerated production of affordable, locally made EVs, leveraging subsidies and favorable EU policies. Tesla is increasingly caught in the middle: pricier than Chinese competitors but less “homegrown” than European rivals.

3. An Aging Product Lineup

Tesla has struggled to keep its lineup fresh. The recent revamp of its signature Model Y failed to boost sales meaningfully. The Cybertruck, while generating buzz in the U.S., has had little impact in Europe and has been met with skepticism.

Importantly, Tesla has not released a truly new mass-market vehicle since the Model 3 in 2017. This makes its portfolio relatively old compared with rivals who are rolling out new models almost every year. Consumers now see Tesla less as an innovator and more as a maturing brand.

Tesla has promised a new affordable EV codenamed “Redwood” for mass production in late 2025 at the earliest, which investors hope will reinvigorate sales. But until then, the company risks losing further market share in a price-sensitive Europe.

4. Strategic Distraction and Investor Doubts

Musk’s ventures beyond Tesla—AI, robotics, and space exploration—have raised concerns among investors that his focus is divided. These worries were confirmed by Tesla’s second-quarter 2025 results. The company’s auto sales revenue fell, and it continued to lose market share to competitors with more affordable EVs. Musk himself cautioned that “a few rough quarters” were ahead.

As the core car business struggles, Tesla’s leadership has increasingly highlighted the company’s long-term ambitions in AI and robotics. This strategy, while exciting to some investors, does little to ease the concerns of those worried about the immediate decline in vehicle sales.

Why BYD Is Winning Over European Buyers

BYD’s trajectory in Europe is almost the mirror opposite of Tesla’s. The Chinese automaker has expanded rapidly outside its home market, where it faces a fierce price war with domestic rivals. In Europe, BYD is gaining traction thanks to a mix of affordable pricing, local expansion, and a diversified lineup. Let’s explore the factors driving this popularity:

1. Competitive Pricing as a Market Lever

Affordability remains BYD’s strongest selling point. Its vehicles are priced below many European models and Tesla’s offerings, often by several thousand euros. The BYD Dolphin Surf, for instance, is listed at €19,990, making it directly comparable to conventional petrol cars—a crucial psychological threshold for cost-conscious buyers.

Thanks to its scale and vertically integrated supply chain—BYD produces its own batteries—the company retains significant room to reduce prices further if needed. This cost advantage provides a formidable edge in Europe’s increasingly price-sensitive environment.

According to The Guardian, BYD has already become the world’s largest producer of battery-electric and plug-in hybrid cars, a position that reinforces its ability to leverage economies of scale and maintain its aggressive pricing strategy.

2. Expanding Lineup Across Segments

Unlike Tesla, which relies heavily on the Model Y and Model 3, BYD offers a broad range of vehicles, from compact city cars to SUVs and luxury models. This wide choice appeals to European buyers, who value both affordability and variety.

3. Strategic Market Targeting

BYD has focused on countries with weaker domestic auto industries or a preference for cheaper models, such as the UK, Spain, and Italy. The UK, which has not imposed EU-style tariffs on Chinese EVs, has become BYD’s biggest target market in Europe.

Even in the EU, where BYD faces a 17.4% tariff due to alleged Chinese state subsidies, demand has remained robust. This suggests that BYD’s pricing strategy is strong enough to absorb tariffs while staying competitive.

4. Cost of Ownership Advantage

Electric cars are already cheaper to own than petrol vehicles for many drivers, thanks to lower running costs. BYD’s ability to offer small EVs at prices close to fossil-fuel cars is crucial for winning over lower- and middle-income households—the largest segment of the European market.

5. Financial Momentum and Investor Appeal

BYD has overtaken Tesla as the world’s biggest EV manufacturer by sales volume, and its European growth is part of this story. For investors, BYD represents a growth stock (up more than 20% in 2025) in a market that still has enormous upside. Its ability to expand despite tariffs shows financial resilience, and its strategy of combining aggressive pricing with product diversity makes it a serious long-term challenger.

Bottom Line

For investors, the diverging fortunes of Tesla and BYD in Europe highlight broader themes in the EV sector, such as Margins vs. Market Share, Tariffs and Trade Risks, Innovation vs. Execution and Valuation Gap.

Tesla’s European decline and BYD’s rapid rise illustrate a deeper realignment in the global EV industry. In a market where affordability, variety, and consumer trust are increasingly decisive, Tesla’s reliance on an aging lineup and the baggage of Musk’s persona are becoming liabilities. BYD, meanwhile, has found a winning formula: competitive prices, broad product offerings, and targeted market entry. Even with tariffs, it has managed to thrive.

For European consumers, this means more choice at lower prices. For investors, it signals a shift in the balance of power. Tesla may still dominate headlines, but on the ground in Europe, BYD is quietly reshaping the market—and in the process, challenging assumptions about who will lead the global EV transition.

Source: The Guardian, CNBC, The Wall Street Journal