Tesla’s (TSLA) troubles in China intensified today after local tech giant Huawei pledged to invest over $1.39 billion into electric vehicle (EV) technology.
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Huawei’s joint EV brand with Chery – Luxeed – will benefit from the investment including an expansion of its research and development team to 5,000 people.
Technology Gap
In a WeChat post, Huawei said that the move would help strengthen the Luxeed brand’s lead in technology terms. Indeed, they hail it as Luxeed’s Phase 2.0
A new energy vehicle (NEV) company dedicated to Luxeed has been established, with production, sales, and services operating independently to provide a better service experience, the two companies said.
Luxeed said that multiple new products are set to launch, with a more diverse product portfolio set to inject strong momentum into the brand’s long-term development.
Luxeed is already on the road. It launched the S7 pure electric sedan in November 2023 and rolled out its second model, the R7 in September last year in a challenge to both the Tesla Model S and Y.
Earlier this month it announced that it would begin pre-sales of updated versions of both the S7 and R7. The official launch of the revamped vehicles is expected next month.
Tesla Tension
It comes only days after it was revealed that sales of China-made Tesla EVs declined 8.4% in July 2025 year-on-year to 67,886 units. This marks the sixth month out of seven this year where Tesla’s Shanghai shipments have seen a decline, reflecting the mounting pressure Tesla faces in the world’s largest EV market.
This is important given that a fifth of total Tesla revenue comes from China.
It is already facing tough competition from the likes of BYD (BYDDY) and Xiaomi (XIACF), which offer more affordable new models. It is also suffering a backlash from chief executive Elon Musk’s high profile and controversial on-off relationship with President Trump.
Tesla plans to fight back in China launching a larger version of the Model Y this fall. It also aims to launch a longer-range, rear-wheel-drive Model 3 in China this September, called the Model 3+. The company hopes this new model will help compete with Xiaomi’s SU7 sedan.
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