Tesla cuts prices in China, key Asia markets as sales falter


China Merchants Bank International, which warned in July that China’s EV sector was headed for a price war, said Tesla’s latest price cuts affirmed that prediction, adding that the U.S. automaker may have to do more, especially as competition with Chinese rivals intensifies.

“Tesla needs to further cut prices and expand its sales network in China’s lower-tier cities amid ageing models,” said CMBI analyst Shi Ji.

“We expect new EV production capacity in China to outpace new demand in 2023 and Tesla Shanghai’s capacity utilisation could drop to about or even below 80 percent this year if its Berlin plant ramps up.”

Tesla’s Shanghai plant, which was expanded last year, also exports vehicles to Europe. There was no immediate indication of price cuts by the EV maker in those markets.

But Sun Shaojun, a popular China auto blogger, said on Weibo that the Tesla price cuts were so large that other automakers, including Tesla’s larger rival BYD would be forced to respond in that market.

BYD recently raised the prices for its best-selling models after the government subsidy program expired at year end.

After Friday’s price cut, Tesla’s Model 3 was the equivalent of about $1,000 more expensive that 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 pricing by competitors but said it would adjust its own pricing according to 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 percent, according to data from CMBI.

Some Tesla owners in China who took delivery in recent months and did not qualify for the reduced prices said on Friday that they planned protests at the automaker’s showrooms in Shenzhen and Henan, according to screenshots of social media chats seen by Reuters.

Tesla did not offer any additional comment when contacted by Reuters. A Tesla spokesperson referred Reuters to Tao’s Weibo post.

The China prices of the Model 3 and Model Y are now 24 percent to 32 percent lower than those in the United States, Tesla’s largest market, Reuters calculations showed, reflecting a range of factors including different material and labor costs.

Tesla also cut the prices of Model 3 and Model Y cars by about 10 percent each in Japan, the first time it had done so since 2021.

In the United States, the Model Y and Model 3 are eligible for up to $7,500 in clean vehicle tax credits as of this month under the terms of 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.



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