Tesla (NASDAQ:TSLA) has been facing serious challenges in China for years, and one of the biggest warning signs came back in 2022 when the Chinese government started banning Tesla cars from certain areas over national security concerns.

As Fortune reported at the time, China prohibited Tesla vehicles from entering the Beidaihe district for two months while the Communist Party held its annual summer retreat. No official reason was given beyond “national affairs,” but it followed other Tesla restrictions, including a ban near military complexes and a similar prohibition in Chengdu during President Xi Jinping’s visit.

Don't Miss:

• Deloitte's fastest-growing software company partners with Amazon, Walmart & Target – Many are rushing to grab 4,000 of its pre-IPO shares for just $0.26/share!
• Many don’t know there are tax benefits when buying a unit as an investment — Here’s how to invest in real estate by mirroring BlackRock's big move

Reuters also reported that some government-run businesses told their employees not to drive Teslas for the same reason. Tesla denied spying, and Elon Musk even threatened to shut the business down if it did. To resolve the issue, Tesla guaranteed that all data from cars in China will be held on local servers.

This was a big change from how China used to treat Tesla. In 2019, China made a special deal that allowed Tesla to build its Shanghai factory without teaming up with a Chinese company, which is usually required for foreign carmakers. The factory became Tesla's most productive plant worldwide and helped the company grow fast in China.

Things are changing now, though. Early in 2025, Tesla’s January sales in China fell by 11.5%. Although factory upgrades and the Lunar New Year are partially to blame for the drop, local brands like BYD and NIO (NYSE:NIO) are quickly catching up.

Trending: Maker of the $60,000 foldable home has 3 factory buildings, 600+ houses built, and big plans to solve housing — you can become an investor for $0.80 per share today.

Sales in Germany fell by 60% in January, France saw a 63% drop, and in the UK, Tesla sales went down by 8% even though electric car sales overall went up. In California, Tesla sales dropped by 11.6% last year, even though people are still buying electric cars at the same rate. Compared with 2023, the state saw 30,000 fewer Model 3 registrations. Although it performed better, the Model Y still lost almost 4,000 units.

One possible factor in Tesla's struggles? Musk's political involvement. His controversial actions, including his alleged illegal interference with the U.S. Treasury Department, have drawn backlash. In Germany and the UK, Musk's support for far-right political movements has reportedly turned off many potential buyers. 

According to the EV Politics Project, Tesla is losing support among its traditional base—urban, progressive-to-centrist EV buyers—faster than it is gaining new conservative supporters, who are generally less interested in EVs.

Read Next:

• Built on the trusted network of Fortune 500 companies, this blockchain company partners with Salesforce to uproot lengthy and expensive B2B transactions, and you can invest with just $100.
• ‘Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. You can invest today for just $0.26/share with a $1000 minimum.

Up Next: Transform your trading with Benzinga Edge's one-of-a-kind market trade ideas and tools. Click now to access unique insights that can set you ahead in today's competitive market.

Get the latest stock analysis from Benzinga?

• TESLA (TSLA): Free Stock Analysis Report
• NIO (NIO): Free Stock Analysis Report

This article Tesla Cars Were Barred For Two Months From An Entire Chinese District, As Beijing Considers Them US Spies originally appeared on Benzinga.com

© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.