SINGAPORE (Reuters) - China's BYD widened its sales lead over Tesla in Singapore in the first half of this year, government data showed, highlighting the challenge facing the world's biggest electric vehicle maker by sales from Chinese rivals.

BYD's strong growth in Singapore, one of the region's smallest auto markets, underscores the Chinese firm's ambition to dominate the Southeast Asia market, where gasoline car brands from Japan and South Korea are popular and Tesla has yet to establish a big presence.

The Chinese firm has had already had early success in the region, claiming Thailand as its biggest overseas market as it expands distribution partnerships with local conglomerates.

Tesla on Tuesday reported its lowest profit margin in more than five years and missed Wall Street earnings targets in the second quarter, hurt by mounting price competition from rivals amid a sharp slowdown in global EV demand.

By contrast, BYD posted a 21% rise in second-quarter sales and continues its aggressive expansion outside of China, including opening its first stores in Vietnam this week, where Tesla has yet to start vehicle sales.

BYD has also ramped up its marketing efforts in Singapore, a small, wealthy island with a population of 5.9 million and where vehicle taxes are among the highest in the world. It opened two restaurants where consumers can dine on dishes inspired by its car models and book a test drive.

BYD's EV sales in Singapore jumped 83% in the first half of this year from the entire 2023 level to 2,587 units, while second-ranked Tesla sold just 28 more cars during the period than last year, putting 969 Teslas on the roads.

There is little price difference between BYD and Tesla in Singapore, where car owners must buy a certificate that costs about S$100,000 ($74,000).

Singapore wants to stop the purchase of combustion-engine cars from 2030. EV sales in the city state accounted for around one third of total vehicle sales in the first half of this year.

In broader Southeast Asia market, Tesla saw its market share fall to 4% in the first quarter of this year from 6% a year earlier, even as the overall EV market grew by 37% during the same period, according to the latest data from research firm Counterpoint.

($1 = 1.3454 Singapore dollars)