Tesla cuts prices in China to boost demand | Business and Economy News

The price cuts follow comments by Tesla boss Musk last week that ‘an economic downturn’ is brewing in China, Europe.

Tesla has slashed starting prices for Model 3 and Model Y models by as much as 9% in China, reversing an industry-wide uptrend amid dwindling demand in the world’s largest auto market.

The price cut, listed on the Chinese electric vehicle (EV) giant’s website on Monday, is Tesla’s first in China in 2022, and comes after Tesla began offering offers limited offers to buyers who selected their coverage last month.

Shares of the Austin, Texas-based company were down 4.9% at $203.9 in initial trading.

The price cuts also follow Tesla CEO Elon Musk’s comment last week that “an economic downturn” is underway in China and Europe, and Tesla said it would missed the car delivery target this year.

Last week, Musk told analysts that demand was strong in the current quarter and that he expected Tesla to “bare through a recession.”

China Commercial Bank (CMBI) says Tesla’s price cuts underscore growing competition risks for electric vehicle makers in China, with industry-wide sales expected to slow back in 2023.

“The drop highlights the possible price war that we have been highlighting since August,” said Shi Ji, an analyst at CMBI.

Tesla slashed prices in China last year in an effort 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 due to input costs. higher.

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

The US automaker and some Chinese rivals have raised prices several times since last year amid rising input costs. However, Tesla has regularly adjusted the prices of its cars in China, including reducing prices, reflecting government subsidies.

Tesla is now China’s third best-selling electric vehicle maker after BYD Motor and SAIC-GM-Wuling, and is the only foreign company in the top 15 list published by the China Passenger Car Association.

“The price drop was mainly due to soft overall auto demand in China due to macro conditions and competition with leading local company BYD,” said American Tiger Securities analyst Bo Pei. .

Pei said XPeng, Nio Inc and Li Auto will have to follow or face greater pressure on volume.

Tesla told Reuters it is adjusting prices to match costs. Capacity utilization at the Gigafactory Shanghai has improved, while the supply chain has remained stable despite the economic impact of China’s strict zero-COVID restrictions, resulting in lower costs .

The starting price for the Model 3 sedan has dropped to 265,900 yuan ($36,727) from 279,900 yuan, while the starting price for the Model Y sport utility vehicle has dropped to 288,900 yuan from 316,900 yuan. yuan, product prices listed on the carrier’s Chinese website showed.

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

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