Pedestrians walking past a Tesla store in Shanghai, China, on March 14, 2024.CostFoto | Nurphoto | Getty ImagesSales of Tesla's China-made electric vehicle rose by nearly 40% in May amid a broader recovery in the country's EV market.The automaker in May delivered 85,982 new energy vehicle units from its Shanghai Gigafactory — where it produces Model 3 and Model Y units for China and several overseas markets — according to preliminary data published Tuesday by the China Passenger Car Association. That's a 39.4% year-on-year increase over the same period in 2025.In total, 1.36 million passenger EVs were sold across China's domestic EV manufacturers in May, a 12% growth year-on-year, and 11% higher than April's total, according to the CPCA's report. These figures indicate "an initial recovery" in China's EV market, the CPCA said, as sales from several other Chinese EV automakers grew modestly in the month.Tesla rival BYD halted an eight-month streak of declining sales volumes in May, posting 376,990 deliveries of its new energy passenger vehicles — a category which includes both battery electric and plug-in hybrid electric vehicles — a 0.02% increase over the 376,930 units delivered last May.Figures from Stellantis-backed Leapmotor and Geely's Zeekr both surged by more than 80% in May. After releasing its first flagship EV in over two years, Nio saw a 62.3% year-on-year increase. Xiaomi reported more than 30,000 EV deliveries in May, a 7.1% year-on-year increase. The tech giant launched its YU7 GT SUV — a performance-focused variant of its popular YU7 SUV — which reportedly set a lap record at the Nürburgring racetrack in Germany, making it the fastest production SUV.A handful of Chinese automakers also reported year-on-year declines in sales — 18.4% for Li Auto, and 4.1% for XPeng.FSD issuesRead more electric car storiesHow Chinese carmaker Geely put roots in the U.S.China's EV price war turns into AI arms race beyond cheaper carsForeign car companies bet on technology to hang onto once-lucrative China auto marketAlibaba's Qwen AI is coming to cars, allowing drivers to order food and book hotels by voiceEV demand is getting a boost from the Iran war — just as auto giants pivot back to combustion enginesBYD and KFC China collaborate to offer 9-minute refueling stationsVolkswagen announces voice AI in its Chinese cars from later this yearToyota to invest $1 billion to increase U.S. production in Kentucky, Indiana plantsNissan's new hybrid is a U.S.-first that mixes EV driving with a gas engineStellantis-backed Leapmotor delivers more than 100,000 EVs for fourth-straight quarter as BYD sales fallEV battery startup pivots to defense industry amid Iran war, weak electric vehicle marketChinese robotaxi companies forge ahead with UAE expansion despite Iran warVolkswagen pushes into driver-assist EVs without Nvidia, exec saysBut it remains unclear whether Tesla's FSD (Supervised) capabilities have already been made available to mainstream consumers in China.On May 29, local media outlet The Beijing News reported that Tesla was facing a lawsuit from a group of 10 Chinese car owners for falsely claiming that its FSD (Supervised) features had were available in China, despite not having received approval from Chinese regulators.Tesla has not responded to CNBC's requests for comment.—CNBC's Evelyn Cheng contributed to this report.