SHANGHAI (RockedBuzz via Reuters) – Tesla cut prices in China for the second time in less than three months on Friday, fueling expectations of a wider price war amid weaker demand in the world’s largest auto market.
The U.S. automaker also cut the prices of its best-selling Model Y and Model 3 electric vehicles in Japan, South Korea and Australia in what a person with direct knowledge of the plan said was part of an effort to help fuel the demand for production from its Shanghai factory, its largest manufacturing hub.
The change is Tesla’s first major move since appointing its top executive for China and Asia, Tom Zhu, to oversee global production and deliveries that have been at the heart of the company’s recent challenges after failing to the 2022 delivery target.
Tesla shares closed up 2.5% at $113.06 on Friday. However, the stock has lost 70% of its value over the past year.
Automakers have long turned to incentives to control inventory, but, until late last year, Tesla was able to keep prices steady or even raise them due to strong orders.
But CEO Elon Musk said last month that “radical changes in interest rates” have impacted the affordability of all cars, new and used, and that Tesla could cut prices to support volume growth.
The latest cut in China, along with another in October and recent incentives for Chinese buyers, mean a 13% to 24% reduction in Tesla’s prices from September in its second-largest market after the US, they showed. RockedBuzz via Reuters calculations.
Tesla has cut the prices of all its Model 3 and Model Y cars in China by between 6% and 13.5%, according to RockedBuzz via Reuters calculations based on the website’s pricing. The starting price for the Model 3 has been reduced to 229,900 yuan ($33,427), from 265,900 yuan. These models are now priced 24% to 32% lower than those in the US, Tesla’s largest market, RockedBuzz via Reuters’ calculations showed, reflecting several factors including material and labor costs.
Grace Tao, Tesla’s vice president in charge of external communications in China, said on Weibo that the price cuts in China reflected engineering innovation and responded to Beijing’s call to encourage economic development and consumption.
Shipments of Tesla cars made in China hit a five-month low in December. Tesla’s Shanghai plant, which was expanded last year, also exports vehicles to Europe.
So far, there’s been no sign of Tesla cutting prices in Europe, where sales jumped 93% in November year-on-year, according to sales data from research group JATO Dynamics, and the Model Y is was the best-selling car for the second time in 2022.
Tesla also saw its share of the European battery electric vehicle (BEV) market rise to 18.9% in November, up from 12.3% in the same month a year earlier.
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The cuts came just days after Beijing ended a subsidy program, with weakening demand forcing Tesla and rivals to absorb the brunt of the move.
China Merchants Bank International (CMBI) said Tesla may need to do more, especially as competition with Chinese rivals intensifies.
“Tesla needs to further cut prices and expand its sales network to lower-tier cities in China due to aging models,” said CMBI analyst Shi Ji.
“We expect new EV production capacity in China to exceed new demand in 2023.”
But Sun Shaojun, a popular Chinese auto blogger, said on Weibo that Tesla’s price cuts were so big that other automakers, including biggest rival BYD, would have to respond.
BYD recently raised the prices of its best-selling models after government subsidies ended.
After the price cut, Tesla’s Model 3 was the equivalent of about $1,000 more expensive than BYD’s Seal, a model launched in July. The Model 3 is now the same price as BYD’s best-selling Han EV.
BYD declined to comment on competitors’ prices but said it would adjust its own based on changes in market demand.
BYD, which sells both plug-in and pure electric vehicles, saw its retail sales in China double in December, while Tesla’s fell 42%, according to data from CMBI.
Some Tesla owners in China who have received delivery in recent months and did not qualify for the reduced prices said on Friday they planned protests at its Shenzhen and Henan showrooms, screenshots of social media chats seen by RockedBuzz via Reuters showed. .
Tesla had no further comment. A Tesla spokesperson directed RockedBuzz via Reuters to Tao’s Weibo post.
Tesla also cut the prices of the Model 3 and Model Y by about 10% each in Japan for the first time since 2021.
In the U.S., the Model Y and Model 3 are eligible for up to $7,500 in clean vehicle tax credits starting this month under the Biden administration’s Inflation Reduction Act, which became law in August .
In 2021, China accounted for just over a third of Tesla’s overall sales.
($1 = 6.8775 Chinese Yuan)
($1 = 133.9200 yen)
(Reporting by Zhang Yan and Brenda Goh; Additional reporting by Nick Carey; Art by Vincent Flasseur; Editing by Kim Coghill, Muralikumar Anantharaman, Alexander Smith and Diane Craft)