Tesla cuts China prices as world’s biggest EV market slows

SHANGHAI – Tesla cut the price of both its locally made models in China, potentially setting the stage for further discounting as overall growth in the world’s biggest electric car market slows.

The starting price of the basic Model 3 sedan was cut 5.9 per cent to 245,900 yuan (S$46,080), according to the automaker’s official website.

The Model Y sport utility vehicle starting price was lowered by 2.8 per cent to 258,900 yuan from 266,400 yuan.

The moves may pile further pressure on Tesla’s rivals to lower prices, after the US automaker initially sparked a prolonged round of discounting in January 2023 that crunched industry-wide profit margins.

Local manufacturers such as Xpeng and BYD, and global automakers like Volkswagen, were all forced to slash prices to defend their market positions through 2023, with only a third of local carmakers eventually meeting their annual sales goals.

Meanwhile, China’s electrified car market is projected to slow for a second year in 2024 as the nation’s patchy economic recovery from the pandemic weighs on consumer sentiment.

Shipments of battery-electric and plug-in hybrid vehicles to dealers are projected to increase 25 per cent to 11 million units this year, China Passenger Car Association said earlier this week.

It compares with a 36 per cent growth in 2023 and a 96 per cent pace in 2022.

“The gap between Chinese automakers and Tesla has been unprecedentedly small,” UBS Group analyst Paul Gong said at an event earlier in 2024, noting the pace at which Chinese automakers have launched new models and their focus on advanced technologies.

Tesla, which mainly relies on just the Model 3 and Model Y for sales, has increasingly been using price cuts to lure buyers.

The US carmaker delivered 1.81 million vehicles globally in 2023, with more than half shipped from its Shanghai factory.

Even though it met its original goal of shipping 1.8 million cars, Tesla was overtaken as the world’s biggest seller of pure electric cars to BYD in the fourth quarter.

2023 was marked by steep price cuts as automakers competed to stay competitive.

Discounting peaked in May, when almost 900 car variants had their price reduced by more than 5 per cent in the preceding three months.

While the markdowns have abated somewhat since then, they remain elevated relative to the past two years.

State-owned manufacturer Chery Automobile Co lowered the price of its electric vehicles by 8,000 yuan on Dec 29, saying it was firing the “first shot” of price reductions for 2024.

Others quickly followed, including BYD, which handed out a package of incentives worth at least 18,000 yuan on the slow-moving Frigate 07 SUV.

Tesla finally revamped the six-year-old Model 3 in September, and is preparing a refreshed Model Y in its China factory, which may come to market as soon as mid-2024, Bloomberg News reported late in December.

By comparison, Xpeng launched five new models in 2023, including upgraded versions, and Li Auto plans to have a line-up of 11 models by 2025.

In other news, Tesla announced it is suspending for two weeks the bulk of production at its factory in Germany, citing a shortage of parts due to shipping delays caused by Huthi rebel attacks in the Red Sea.

The suspension was disclosed just hours before the United States and Britain announced early on Jan 12 they had carried out air strikes against the Iran-backed rebels over their repeated threats to vessels in the key waterway.

Tesla said the Red Sea attacks had led to delays that created a “gap in the supply chains”, resulting in production at the facility south-east of Berlin being suspended “with the exception of a few sectors”.

“From Feb 12, production will resume in full,” it added. BLOOMBERG, AFP

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