Tesla is back in the news and this time, it is about dealings with its Chinese market. The electric vehicle (EV) company has reduced prices for its Model 3 and Model Y cars in China, for the second time in less than three months. This drop in price could fuel a price war in the midst of dwindling demand in the world’s auto market.
After Tesla reduced prices just in October of 2022, it has slashed a total of about 10,000 yuan off its price tag for Chinese customers, amounting to a 13% to 24% reduction between September and now.
Now Tesla has slashed prices for all versions of its Model 3 and Model Y cars in China by between 6% to 13.5% based on the prices shown on its website. As a result, the starting price for Model 3 is now 229,900 yuan ($33,427) from 265,900 yuan.
This move comes after Tesla hit its lowest delivery for China made cars in December 2022. A record low in five months. It also comes days after Beijing ended a subsidy program that helped build the world’s largest EV market.
According to Reuters, the prices of the Model 3 and Model Y cars in China are now 24% to 32% lower than those in the United States, Tesla’s largest market. This is due to various factors including different material and labour costs.
Tesla, whose shares have been bearish in the stock market, is dealing with aggressive competition from other EV manufacturers in China like BYD, a Chinese EV maker that has a much larger variety of offerings comprising both plug-in and pure electric vehicles. BYD sales doubled in December while Tesla’s fell 42%, according to the China Merchants Bank International (CMBI).
Tesla seems to be feeling the pressure in the Chinese market as demand for EVs begins to reduce. With falling stock prices and a brand positioned to be purely luxurious, it will be interesting to see how the company adapts in the coming months.
