How has Tesla’s entry affected China’s electric vehicle market?

We study the impact of Tesla’s entry on China’s electric vehicle (EV) market. We find that Tesla’s entry has substantially increased the demand for EVs in China, and therefore has benefited Chinese EV producers. However, we also find that this positive impact was nullified for local EV producers that compete with Tesla in a more head-to-head manner, and those that compete in markets that host Tesla Galleries and have a higher annual income per capita. Moreover, local manufacturers lowered their EV prices when faced with competition from domestically produced Tesla vehicles, and the magnitude of such price reductions was larger for battery electric vehicle (BEV) models.