Tesla Inc. (TSLA) is having a rough time in Europe, and cheaper cars aren't fixing the problem. December registrations fell sharply across several major markets, continuing a slump that started in late 2024 as competition intensifies from all directions.

The numbers paint a bleak picture. In France, Tesla registrations crashed 66% in December and dropped 37% for the entire year. Sweden was even worse, posting a 71% December decline and 70% annual slide. Portugal and Spain also saw full-year sales fall 22% and 4%, respectively.

Here's the thing: Tesla actually tried to address this by rolling out lower-priced versions of the Model Y and Model 3. It hasn't worked. By November, Tesla's market share across Europe, the U.K., and the European Free Trade Association had slipped to 1.7% from 2.4% a year earlier, even as electric vehicles overall captured 19% of the car market.

The broader context doesn't help either. Reuters reported Friday that Tesla is expected to show a sharp decline in global fourth-quarter deliveries when it reports results.

One Country Bucking the Trend

Norway is the exception to Tesla's European struggles. Registrations there surged 89% in December to 5,679 vehicles, pushing the brand's market share above 19% and marking a record sales year. This matters because Norway is basically the world's electric vehicle laboratory—nearly all new car purchases there are electric, making it a crucial proving ground for EV makers.

Chinese Automakers Are Eating Tesla's Lunch

While Tesla stumbles, Chinese EV makers are charging ahead. They captured a record 12.8% share of Europe's EV market in November, led by BYD Co Ltd (BYDDY), Stellantis NV (STLA)-backed Leapmotor, and Chery. Chinese-made hybrid vehicles also crossed a 13% market share across the EU, EFTA countries, and the U.K.

BYD is particularly aggressive. The company posted nearly 222% year-over-year sales growth in Europe in November, a stunning contrast to Tesla's declining numbers. BYD isn't stopping there—it's preparing to introduce a kei-class electric vehicle to the European market, pending regulatory approval.

The Chinese export machine is firing on all cylinders. Shipments to Europe rose 63% year-over-year, while total vehicle exports increased by more than 87%. Companies like XPeng Inc. (XPEV) are accelerating their European expansion by entering smaller markets such as Estonia, Lithuania, and Latvia, systematically filling gaps that established automakers have overlooked.

What makes this particularly challenging for Tesla is that Chinese automakers are attacking from multiple angles. They're not just competing on price—they're expanding into new segments, targeting untapped markets, and moving faster than traditional Western automakers can respond. It's a coordinated push that's reshaping the European EV landscape.

For now, Tesla's European woes continue despite attempts to compete on price. The question is whether the company can find a new strategy to counter the Chinese offensive, or if this marks a more fundamental shift in the global EV pecking order.

TSLA Price Action: Tesla shares were up 1.59% at $456.87 during premarket trading on Friday.