US electric carmaker Tesla Inc delivers China-made Model 3 sedans to customers at its Shanghai plant on Jan 7, 2020. [Photo/China News Service]

Qin Lihong, co-founder and president of Nio, said that lower brand recognition is hurting Nio's sales.

"Statistics show that of the visitors who tried models from both companies, the chances of their choosing us is 50-50. But sometimes they don't come in," said Qin.

Zhang said the China-made Model 3 will also become a rival of traditional premium brands' entry-level gasoline cars.

"It will be a reasonable choice if you don't have a license plate for gasoline cars in big cities like Beijing or Shanghai. It will not take long before Audi, Mercedes and BMW recognize the new competitor," said Zhang.

Wang Hao, general manager of Tesla China, said in a Weibo post on Jan 3 that: "The Chinese market is vast enough (for all electric carmakers) and our rivals are gasoline carmakers."

Automotive Foresight estimated sales of China-made Model 3 sedans could reach 100,000 units this year. Analysts at Industrial Securities expected sales to touch 150,000 during the same period.

Last year, Tesla delivered around 367,500 vehicles globally, with the Model 3 sedans accounting for 83 percent.

Zhang at Automotive Foresight said Tesla's increased China presence will have little impact on established carmakers that are also exploring the electric car market because they have better abilities than startups in manufacturing and cost control.

Xu Heyi, chairman of Mercedes and Hyundai's Chinese partner BAIC Group, said: "Tesla's Model 3 is a benchmark and it will spur us to pursue healthier development. You ask if we are afraid of it? No, we are not. We have our advantages."

The group's new energy arm, BJEV, is one of the largest electric carmakers in the country, and its EU-series vehicles were second only to Model 3 in volume globally in the first 10 months of last year, but were much cheaper.

BJEV is making every effort to move upward and has started trial production of models under its Arcfox brand in a plant built with Canadian automotive supplier Magna.