Tesla lowered car prices in China for the second time in 3 months

SHANGHAI, Jan. 6 (Reuters) – Tesla (TSLA.O) China cut car prices for the second time in less than three months on Friday, fueling a price war amid bleak demand forecasts in the world’s largest auto market.

The latest cut, along with the cut in October plus various incentives of up to 10,000 yuan for Chinese buyers over the past three months, represents a 13% to 24% drop in Tesla’s prices from September, according to Reuters calculations.

The US electric vehicle (EV) maker on Friday cut prices for all versions of its Model 3 and Model Y vehicles in China by between 6% and 13.5%, according to Reuters calculations based on prices displayed on its website. For example, the starting price of the Model 3 has been reduced to 229,900 yuan ($33,427) from 265,900 yuan.

Grace Tao, Tesla’s vice president responsible for overseas communications in China, posted on her Weibo social media account on Friday, “Tesla’s price adjustments are supported by a number of engineering innovations.” “[They] Responding to the government’s call to promote economic development and encourage consumption.”

The move comes after deliveries of Chinese-made Tesla cars in December hit a five-month low, and also just days after Beijing ended a subsidy program that helped build the world’s largest market for electric cars. Weak demand forced Tesla and its competitors to absorb the brunt of this decision.

China Merchants Bank International (CMBI), which warned in July that China’s electric car sector was heading towards a price war, said Tesla’s price cut confirmed the prediction and said the US company may have to do more, especially as competition with rivals intensifies. the chinese. .

The Model 3 and Y were the only two models Tesla offered in China, though on Friday it announced pricing for the Model S and X in China.

“Tesla needs to further reduce prices and expand its sales network in lower-tier Chinese cities amid older models,” said Shi Jie, an analyst at CMBI.

“We expect new electric vehicle production capacity in China to exceed new demand in 2023, and Tesla’s Shanghai capacity utilization could drop to around or even less than 80% this year if its Berlin plant increases.”

BYD (002594.SZ)which has a much larger variety of offerings that include both plug-in vehicles and pure electric vehicles, saw retail sales in China double in December while Tesla sales fell 42%, according to data from CMBI.

Tesla offered no additional comment when contacted by Reuters, and its spokesperson merely referred to Tao’s post on Weibo.

The automaker’s discounts have brought the Model 3’s starting price to the same level as BYD’s best-selling Han EV sedan, which sells from 219,800 yuan. The Chinese electric vehicle maker recently raised the prices of its best-selling models after losing central government subsidies.

Sales of BYD’s Han series, including plug-in hybrid versions, were more than double those of the Model 3 in China in the first 11 months, according to the China Passenger Car Association.

Reuters calculations showed that car prices in China for the Model 3 and Y are now 24% to 32% lower than those in the US, Tesla’s largest market, for reasons that include different material and labor costs.

($1 = 6.8775 CNY)

(Reporting by Zhang Yan and Brenda Goh) Editing by Kim Coghill and Muralikumar Anantharaman

Our standards: Thomson Reuters Trust Principles.

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