Tesla sold 74,402 China-made electric vehicles in February, up 31.65% from a year earlier, China Passenger Car Association data showed on Friday.
That was up 12.6% from January, when the U.S. electric car maker delivered 66,051 China-made Model 3 and Model Y electric cars.
Rival BYD with its Dynasty and Ocean series of EVs and hybrids sold 191,664 vehicles last month, CPCA data showed.
Tesla had planned to run its Shanghai plant at an average weekly output rate of 20,000 units in February and March after price cuts it made in early January stoked demand.
But the latest weekly data showed its retail sales in China were still running short of the pace seen in the fourth quarter, indicating the bump from discounted prices in its biggest overseas market is waning.
Tesla's market share in China's new energy vehicle sector, which includes both pure electric and plug-in hybrid cars, slid to 9% in February from 10% a year earlier, according to data from China Merchants Bank International.
BYD's market share increased to 37% from 27%.
As competition intensifies, Tesla aims to increase its exports and expand into new markets to digest output from its factory in Shanghai.
It has started delivering cars to Thailand and set up its first Supercharger station in there in February.