Tesla cars on Chinese government's shopping list for the first time

Tesla's best-selling Model Y was included in a list of electric and plug-in hybrid models that a local government in China can purchase as a service vehicle.

Tesla's (TSLA.O) best-selling Model Y was included on a list of electric and plug-in hybrid models that a local government in China can purchase as a service vehicle, official Chinese media The Paper reported Thursday

It is the first time Tesla cars have been eligible for government purchases in China, The Paper added. The government of east China's Jiangsu province released 56 batches of new purchases of energy vehicles to be used as service cars by party, government and public organizations in an official statement on June 6.

In addition to the Model Y made at Tesla's Shanghai factory and Volvo Cars' XC40, the other 54 lots were all electric and hybrid vehicles from Chinese brands. Volvo Cars is owned by Chinese automaker Zhejiang Geely Holding Group.

Neither the government nor the Chinese media specified the number of Model Y cars that could be purchased by the Jiangsu provincial government. Tesla cars were banned from some government and military compounds in China.

The restrictions were lifted after it won the backing of the country's main auto industry association, which said in April that data collection by Tesla's fleets in China complied with regulations.

For the first time, a foreign electric vehicle manufacturer has been included on the Chinese government's procurement list. This milestone reflects growing government support, although local deliveries have declined due to domestic competition and potential overseas tariffs.

As overseas demand for Chinese cars is overshadowed by the possibility of tariffs and domestic competition intensifies, Tesla's China-made vehicle deliveries by Tesla fell 9% in the first half of the year compared to the same period in 2023.

However, Tesla CEO Elon Musk's trip to China in late April to meet with Premier Li Qiang appears to have paid off. China has stepped up its support for Tesla, which plans to build a data training center and launch its full autonomous driving software in the country this year, despite ongoing tensions with the United States over technological rivalry.

Collaboration: Grupo Auge | Reuters (International).