Tesla Cuts China Prices, Partly Reversing Previous Increases

Tesla Inc. cut the price of its cars in China by about 5% as it ramps up production at its Shanghai factory, partly reversing price hikes imposed earlier this year.

The US-based electric vehicle pioneer lowered the price of its locally-built basic Model 3 to 265,900 yuan ($36,774) from 279,900 yuan effective Monday, its website shows. The starting price of a Model Y SUV was cut to 288,900 yuan from 316,900 yuan.

The cuts come as Tesla faces hotter competition from local EV makers such as BYD Co., which sold a record 200,973 vehicles last month, and upstarts like Nio Inc. and Xpeng Inc., which are expanding their line-ups. Domestic automakers accounted for almost 80% of EV sales through the first seven months of the year, according to data compiled by the China Passenger Car Association.

Tesla may also be looking to goose sales in one of its key markets after last week reporting lower-than-expected revenue. Chief Executive Officer Elon Musk said that China is in a “recession of sorts” and that in general, demand is harder to come by.

“EV competition this year is very fierce, and Tesla’s performance may not match its expectations,” said Yale Zhang, managing director at Shanghai-based consultancy Autoforesight Co. “Hence, it decided to hit its rivals with a direct blow by cutting prices to further boost sales in the last two months of the year.”

The price cuts contrast with several increases carried out earlier this year, when Musk said both Tesla and his space exploration company SpaceX were “seeing significant recent inflation pressure” in raw materials and logistics.

Tesla delivered a record 83,135 cars in September, including 5,522 for export, after upgrading production capacity at the Shanghai factory. The plant can now produce about 1 million cars a year.

“It is an expected price cut,” said Wang Hanyang, an automotive analyst at Shanghai-based 86Research Ltd. “Order inflow for Model 3s and Ys haven’t fulfilled the expanded production capacity, as you can tell from the shortened wait time. The company needs to secure more orders by cutting prices.”

Delivery times for a Model Y in China is just one to four weeks now, and four-to-eight weeks for a Model 3, according to the company’s website. That compares with up to 12 weeks before the Shanghai factory upgrade. In the US, wait times for a Model Y stretch from December to as late as April 2023.

A representative for Tesla China said the “improvement of production capacity utilization of Tesla’s Shanghai factory and relative stability of the supply chain have contributed to lower costs. Tesla has always priced according to the cost.”