Tesla has slashed China prices for its Model Y and Model 3 cars by as much as 9%, undercutting competitors as demand slows in the world’s second largest economy.
The price cuts are Tesla’s first in China in 2022, posted on the electric vehicle (EV) maker’s website on Monday.
The starting price for the Model 3 sedan was reduced to 265,900 yuan ($36,727) from 279,900 yuan, while that for the Model Y sport utility vehicle was cut to 288,900 yuan from 316,900 yuan, the product prices listed on its Chinese website showed.
The price cuts come after Tesla chief executive Elon Musk said last week that “a recession of sorts” was under way in China and Europe and Tesla said it would miss its vehicle delivery target this year.
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Tesla upgraded its Shanghai factory earlier this year in a development that brought the factory’s weekly output capacity to around 22,000 units compared with levels of around 17,000 in June.
Tesla is currently China’s third best-selling EV maker after BYD Motor and SAIC-GM-Wuling, and is the only foreign player in the top 15 list published by the China Passenger Car Association.
‘Price War’
China Merchants Bank International (CMBI) said Tesla’s price cuts underlined the growing competitive risk for EV makers in China, with industry-wide sales projected to slow into 2023.
“The price cuts underscore the possible price war which we have been emphasising since August,” Shi Ji, an analyst with CMBI, said.
Analysts are warning of a growing car inventory glut for autos in China, where auto sales growth slowed in September while EV sales rose at their slowest pace in five months.
The US automaker and several Chinese rivals have hiked prices several times since last year amid rising raw material costs. But Tesla has also regularly adjusted prices of its cars in China, including reductions, reflecting government subsidies.
CMBI analysts warned last week that 2023 would bring more competition to the EV sector, saying that it expected to see sales growth for EVs and hybrids on a combined basis to drop below 50%.
Economic Slowdown
Data on Monday showed retail sales in China grew 2.5% in September, below the expected 3.3% rise and less than half August’s 5.4% growth.
Tesla said it was adjusting prices in line with costs. Capacity utilisation at its Shanghai Gigafactory has improved, while the supply chain remains stable despite the impact on the economy of China’s stringent zero-Covid restrictions, leading to lower costs, it said.
Musk told analysts last week that demand was strong in the current quarter and said he expected Tesla to be “recession-resilient”.
- Reuters, with additional editing from Alfie Habershon
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