Tesla slashes prices in China by up to 9% as analysts warn of ‘price war’

SHANGHAI, October 24 (Reuters) – Tesla (TSLA.O) cut start prices for its Model 3 and Model Y cars by up to 9% in China, reversing an upward trend in the industry amid signs of slowing demand in the world’s biggest auto market.

The price cuts, published Monday in listings on the electric vehicle (EV) giant’s Chinese website, are Tesla’s first in China in 2022, and come after Tesla began offering limited incentives to buyers who have opted for his insurance last month.

Shares of the Austin, Texas-based company fell 3.3% to $207.36 in trading before the bell.

The price cuts also follow Tesla Chief Executive Elon Musk’s comment last week that “some kind of recession” was underway in China and Europe, and Tesla said so. would miss its vehicle delivery target this year.

Musk told analysts last week that demand was strong in the current quarter and that he expected Tesla to be “recession resistant.”

China Merchants Bank International (CMBI) said Tesla’s price cuts underscored growing competitive risk for electric vehicle makers in China, with industry-wide sales expected to slow through 2023.

“The price declines underline the possible price war that we have been insisting on since August,” said CMBI analyst Shi Ji.

CMBI analysts warned last week that 2023 would bring more competition to the electric vehicle sector, saying they expected to see sales growth of electric and hybrid vehicles on a combined basis fall below 50%. Read more

Tesla had cut prices in China last year in a bid to be more competitive in the country, while in the United States, its biggest market, the electric vehicle maker has raised prices over the past year. past year due to the higher cost of raw materials.

Monday’s data showed retail sales in China rose 2.5% in September, below the expected 3.3% rise and less than half August’s 5.4% growth.

The U.S. automaker and several Chinese rivals have repeatedly hiked prices since last year amid rising raw material costs. But Tesla has regularly adjusted the prices of its cars in China, including discounts, to reflect government subsidies.

Tesla told Reuters it was adjusting prices based on cost. Capacity utilization at its Shanghai Gigafactory has improved, while the supply chain remains stable despite the impact on the economy of China’s strict zero-COVID restrictions, driving down costs, a- he declared.

The Model 3 sedan’s starting price has been reduced to 265,900 yuan ($36,727) from 279,900 yuan, while that of the Model Y sport utility vehicle has been reduced to 288,900 yuan from 316,900 yuan, according to prices. of the products listed on its Chinese website.

Tesla upgraded its Shanghai factory earlier this year, after which it delivered 83,135 Chinese-made electric vehicles in September, setting a production record for the factory since production began in December 2019. Read more

Tesla is now the third best-selling electric vehicle maker in China after BYD Motor (002594.SZ) and SAIC-GM-Wuling (GM.N)(600104.SS)and is the only foreign actor in the Top 15 list published by the China Passenger Car Association.

($1 = 7.2399 Chinese Yuan)

Reporting by Zhang Yang and Brenda Goh in Beijing and Akash Sriram in Bangalore; Editing by Kenneth Maxwell and Arun Koyyur

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