Tesla’s sales in China logged their best month for the year so far in August, with the U.S. electric vehicle maker benefiting from brisk sales in smaller cities.

Tesla said it sold more than 63,000 cars in the world’s biggest auto market last month, a hefty 37% jump from July, but probably still down from August last year when it sold 64,694.

While an encouraging improvement, its performance lags major Chinese rivals by a wide margin.

BYD, the world’s biggest EV maker, said its China passenger vehicle sales surged 35% in August from a year earlier to a record monthly high of 370,854. Other local EV competitors including Leapmotor and Li Auto also reported higher sales.

Like many other automakers, Tesla has been badly bruised by a protracted price war in China where economic growth has also been sluggish and consumer confidence fragile. Its China sales declined 5% for the first half of the year.

Although Tesla has cut its local sales force as part of a global downsizing, a number of factors have helped recent sales momentum.

Tesla has since April offered zero-interest loans of up to five years for buyers, while several local governments have made its cars eligible for official car purchases in recent weeks.

It also received a key regulatory nod earlier this year, with the country’s top auto industry association saying that data collection by Tesla vehicles was compliant with regulations, allowing Tesla cars to enter some government compounds that they used to be banned from.

An analysis by China Merchants Bank International of Tesla’s China sales in July showed a 78% year-on-year increase in deliveries in so-called tier-three cities while its sales in second-tier cities such as Hangzhou and Nanjing rose 47%.

Separate data from the China Passenger Car Association for Tesla China-made vehicles which includes exports showed sales grew 3% in August from a year earlier to 86,697 units.

Deliveries of its China-made Model 3 and Model Y vehicles rose 17% from July. Tesla plans to produce a six-seat variant of its Model Y car in China from late 2025, two people with direct knowledge of the matter said. The move is aimed at increasing the appeal of its best-selling yet aging EV.