Tesla (NASDAQ: TSLA) reported a 3% year-on-year increase in China-made EV sales in August, with deliveries of its China-made Model 3 and Model Y up 17% from July, according to data released by the China Passenger Car Association (CPCA).

Chinese rival BYD (SZ: 002594) reported a 35.3% year-on-year increase in sales of its Tang and Ocean series EVs and plug-in hybrids in August, reaching a new high of 370,854 units.

Other local EV rivals, such as Leapmotor (HK: 9863) and Li Auto (NASDAQ: LI), also reported sales growth.

Tesla's sales surge in China, both domestically and for exports to Europe and elsewhere, is in line with the expansion of local car purchase incentives and government-backed achievements.

Tesla's China sales rebounded in the third quarter, even as its local sales team shrank due to global layoffs.

Tesla's deliveries in third-tier cities in July grew 78% year-on-year, while sales in second-tier cities such as Hangzhou and Nanjing rose 47%, according to analysis by China Merchants Bank International (CMBI).

"We expect Tesla's retail sales to reach 65,000 units in August, mainly driven by strong growth in small cities," said Shi Ji, an analyst at CMBI Hong Kong. "If this growth rate continues until September, Tesla may hit a new quarterly sales record in the Chinese market in the third quarter of 2024."

Since April, Tesla has launched a zero-interest financing plan for up to five years to attract car buyers who are more cautious about spending on commodities in the economic downturn.

Recently, some local governments have also expressed support for Tesla, making its vehicles eligible for official procurement.

The country's leading auto industry association said in April that Tesla's data collection in China complies with regulations, allowing Tesla vehicles to enter various government facilities that were previously prohibited.