In August, Tesla, the American automotive manufacturer (NASDAQ:TSLA), achieved a 9.3% year-over-year increase by selling 84,159 electric vehicles (EVs) produced in China, as reported by the China Passenger Car Association (CPCA) on Monday.

Sales of China-made Model 3 and Model Y cars rose 30.9% from a month earlier.

In August, the Chinese competitor BYD (SZ:002594), known for its Dynasty and Ocean series of electric vehicles (EVs) and petrol-electric hybrid models, reported a remarkable 57.5% year-over-year surge in passenger vehicle deliveries, totaling 274,086 units.

In early 2023, Tesla started a fight over prices in the biggest car market in the world. They did this to ensure they keep selling many cars because their main competition in China is BYD, and some smaller car companies.

Its moves included slashing prices in China twice in three days in August and announcing additional cuts on Friday, adding to its July cash rebates and stoking a price war that has drawn in 40-plus brands in China.

With sales being prioritised, Tesla’s profit margin has taken a hit. Reuters’ calculations showed that its gross margin from automotive sales plunged to 17.9% in the first half from 27.8% in the year-earlier period.

By contrast, BYD’s latest financial disclosure showed its automotive gross margin rose to 20.67% in the six months ended June, an increase of 4.36 percentage points from the year before. Citi analysts said this was helped by the automaker’s “scale production advantages”.

On Friday, however, Tesla first released a refreshed version of its Model 3 vehicle in China, with a starting price 12% higher than the previous base rear-wheel drive model.

Smaller rival Xpeng (NYSE:XPEV) and newcomer Xiaomi (OTC:XIACF), among others, are aiming to launch even more budget-friendly car models, increasing the level of competition.

Xpeng plans to unveil a new A-class model priced at approximately 150,000 yuan ($20,571.62). This initiative is part of their MONA project, which emerged from their late August acquisition of Didi’s smart EV unit. This pricing strategy departs from Xpeng’s usual models, typically priced above 200,000 yuan.

Xiaomi, beginning life as a budget phone maker, has also won the nod from China’s state planner to make EVs.

Adding to the challenges were falling car sales, despite a raft of measures to underpin big-ticket spending, as China’s post-pandemic economic recovery falters, with major banks flagging the risk of China missing its 2023 growth target of around 5%.