Chinese electric vehicle sales are having a slow start to 2026. That raises the stakes for Tesla's pivot into physical AI.

Over the weekend, BYD, XPeng, Li Auto, and NIO reported their February delivery figures.

BYD delivered 187,782 passenger vehicles, down 41% from a year ago. It delivered 79,539 all-electric cars, down 36%. BYD also sells plug-in hybrids.

XPeng delivered 15,256 cars, down 50% from last year. Li Auto delivered 26,421, down 5%. Only NIO posted a gain, delivering 20,797 cars, up 57% from a year ago.

Combined, NIO, Li, and XPeng delivered 62,474 cars, down 10.6% from a year ago. It was the worst monthly combined performance since January 2023, when sales fell 17.2% from the year earlier.

It was the worst sales decline for BYD from the year-ago period since Barron's started tracking sales in 2021.

The results don't bode all that well for Tesla. China is the world's largest market for electric vehicles, and it accounted for 22% of Tesla's revenue in 2025.

Tesla sold about 631,000 cars in China in 2025, down about 4% from the prior year, according to industry data. Tesla doesn't provide regional sales volumes. It was Tesla's first annual sales decline in China.

Tesla sold about 1.6 million cars globally in 2025, down almost 9% from 2024. It was the second consecutive annual decline for the EV maker.

Falling sales haven't hurt shares. Coming into Monday trading, Tesla stock was up about 37% over the past 12 months. Investors are focused on the company's AI efforts, believing they will unlock a new era of earnings growth. Tesla launched an AI-trained robo-taxi service in Austin, Texas, in June and plans to expand it to more cities in the first half of 2026. It also plans to unveil the third generation of its AI-trained humanoid robot, Optimus, early in 2026.

Exceeding or disappointing expectations on those AI catalysts will do more for the stock in 2026 than even EV sales. Still, EV sales matter; they provide most of Tesla's cash flow, which it is investing in AI opportunities.

Coming into Monday trading, NIO stock was up 5% over the past 12 months, about 10 percentage points behind the S&P 500. Li and XPeng shares were down 43% and 18%, respectively. BYD shares were down 23%.