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• Former Tesla president described how Tesla tore down Chinese EVs to learn how they kept costs down.
• As the Model 3 and Model Y developed over time, they came to share around 75% of their parts and are very keenly priced for the segment—a lesson from China’s automakers.
• Innovative manufacturing gave Tesla an early lead on the global EV market, but now that lead is fading.

Carmakers regularly test and tear down other companies’ cars. This is a common practice regardless of manufacturer—it’s why a Xiaomi was spotted at the Ferrari factory, for instance—and Tesla has done its fair share of benchmarking and reverse engineering. According to a former company executive, Tesla tore down Chinese EVs and then applied the lessons to the Model 3 and Model Y, which became global bestsellers.

John McNeill was the president of Tesla for nearly three years between 2015 and 2018, which is exactly when the company was developing the Model 3, and its larger crossover cousin, the Model Y. He called Tesla “a learning sponge” and said the biggest lesson learned from Chinese cars was reusing as many components as possible in multiple models.

In a new interview with Business Insider, McNeill dished on how Chinese automakers took Tesla’s production playbook and ran with it.

“The Chinese engineers are really disciplined about reusing parts underneath the hood that the customer can’t see, and they save a lot of money that way,” he said. Developing common parts for multiple models is nothing new for Western automakers, but Chinese companies take this to another level, according to McNeill.

He went on to say that “If you tear down all the BYDs—same windshield wiper motor across all of them; same heat pump across all of them; same conduit across all of them,” which he deemed “super smart because a windshield wiper motor really doesn’t change or add to the experience.”

Tesla never hid the fact that the Model 3 and Model Y share many components. Elon Musk once said they are around 75% the same sharing a platform, powertrains, interior components, and many other parts like door handles or buttons. The front seats, for instance, are pretty much identical, only they are mounted higher in the Model Y.

This extreme parts-sharing philosophy enabled Tesla to reduce production costs and pass the savings on to consumers—its compact EVs were (and still are) very keenly priced in the U.S. and Europe. This made the Model 3 an instant hit in 2018, its first full year on sale, moving around 138,000 units in the United States and becoming the country’s best-selling premium vehicle.

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It was even a hit in China, where it launched one year later and was locally manufactured in the Shanghai Gigafactory, which also supplies the European market. It became China’s bestselling plug-in car in 2020, selling just shy of 138,000. Fast-forward to today and Tesla isn’t doing so well in China, with sales falling quarter to quarter—they dropped to a three-year low in October, and its market share plummeted to 3.2% from 8.7% a year earlier, according to CNBC.

So while Tesla included the same ideas and techniques as Chinese cars into its vehicles, that worked for a while, but now local players are producing cheaper EVs that are better suited to local tastes. Many are also technologically superior, with much faster charging, more power and more of the features that Chinese buyers are looking for and aren’t finding in Teslas.

Even though McNeill admits that Tesla is “absolutely relentless” when it comes to cost reduction, that’s not enough to compete in China anymore. Tesla sales are mostly falling around the world, too, even though the cars are still good and they still provide the best EV experience outside China, helped by the expansive Supercharger network.