Tesla is on a ride in Europe, but competition is not far behind

Elon Musk-led electric vehicle company Tesla Inc. seems ready to perform better than expected this year as sales trends have been quite encouraging, especially in Europe.

Morgan Stanley on Monday raised the company’s second-quarter delivery forecast as sales numbers from Europe and China were higher than estimates during April and May.

The brokerage expected Tesla to deliver about 413,000 vehicles in the second quarter of 2026, up from its previous estimate of roughly 373,000 and above the market consensus of around 401,000 vehicles.

European push

During the first five months of 2026 till May, Tesla’s vehicle sales in Europe rose by a significant 77% to 89,180 compared with a year earlier, the European Automobile Manufacturers’ Association data showed. The company’s market share in the region during the period climbed to 1.9% from 1.1%.

In May, Tesla sold 22,000 cars in Europe, which was more than Ford, Nissan or Honda, even when including their fossil-fuel models, noted a report.

Morgan Stanley highlighted that Tesla’s rebound in Europe suggests that the company could slow, or even reverse, a decline in its global car sales.

Interestingly, this rebound came as electric vehicle demand strengthened across the European Union amid lower prices. Europe saw battery-electric car registrations rising 35.7% in the first five months of the year to 950,521 units.

Chinese automakers are still a threat

However, even though Tesla’s European numbers look encouraging, the threat from Chinese automaker BYD persists. BYD’s EU registrations in May surged 158.8% year-on-year to 26,017 units, exceeding Tesla’s monthly sales.

In the January-May period, too, BYD sales rose 158.9% to 99,578 units. This also beats Tesla in terms of total registrations during the period.

Notably, BYD also managed to increase market share in the EU to 2.7% in May from 1.1% a year earlier, while its January-May share rose to 2.1% from 0.8%.

These numbers highlight that even as Tesla is beating consensus estimates, competitive pressure has intensified as Chinese automakers expand aggressively with more affordable models and broader product ranges.

Making inroads in China

Meanwhile, Tesla’s China sales also boosted sentiment for the company. The company’s May domestic sales rebounded both from a year earlier and the previous month due to a broader recovery in China’s EV market.

Tesla delivered 85,982 new energy vehicle units from its Shanghai Gigafactory in May, a 39.4% year-on-year increase over the same period in 2025. Notably, Tesla produces Model 3 and Model Y units for China and several overseas markets in the Shanghai Gigafactory.

Overall, China recorded 12% year-on-year growth in sales of electric passenger vehicles in May at 1.36 million.