Tesla cuts prices in China on Model 3 and Model Y EVs to keep commanding lead in premium segment of fast-growing market

Carmaker cut prices by up to 6 per cent after reporting 15.7 per cent month-on-month sales growth to 75,805 units in mainland China in December
‘Chinese home-grown rivals have launched a raft of new intelligent electric cars to mount a challenge to the US EV builder,’ analyst says

Electric & new energy vehicles

Daniel Renin Shanghai

Published: 1:00pm, 12 Jan 2024

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Tesla has cut the prices of its Shanghai-made vehicles by up to 6 per cent as it works to maintain its leading position in the premium segment of the world’s largest electric vehicle (EV) market.

The Texas-based company announced on Friday that the price of the entry-level edition of its Model 3 will be reduced from 261,400 yuan (US$36,814) to 245,900 yuan, while the starting price of the Model Y is now 258,900 yuan, down from 266,400 yuan.

The price cuts come after Tesla reported 15.7 per cent month-on-month sales growth to 75,805 units in mainland China in December, according to data released by the China Passenger Car Association.

“Tesla apparently hopes to maintain its market share in the highly competitive market,” said Phate Zhang, founder of Shanghai-based EV data provider CnEVPost. “Chinese home-grown rivals have launched a raft of new intelligent electric cars to mount a challenge to the US EV builder.”

Workers check a new Xpeng EV at the end of an assembly line in Zhaoqing, in southeast China’s Guangdong province, on October 09, 2023. Photo: Xinhua

Tesla also lowered the price of the dual-motor version of the Model 3 by 3.9 per cent to 285,900 yuan and offered a 2.1 per cent discount on the dual-motor Model Y, which now sells for 299,900 yuan.

The front-runner in China’s premium electric vehicle (EV) segment delivered 603,664 EVs made in its Shanghai Gigafactory to buyers in China last year, up 37.3 per cent from 2022. The growth was nearly unchanged from the 37 per cent sales rise recorded in 2022 when it delivered about 440,000 vehicles.

The company’s domestic rivals are not exactly nipping at its heels. Its closest competitor in the premium segment, Li Auto, delivered about 376,000 cars in 2023.

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Tesla adjusts the prices of its locally built vehicles regularly based on production costs, Grace Tao, Tesla’s head of communications and government affairs in China, said on the microblogging site Weibo last January. Since January 2020, Tesla China cut prices on its Chinese-made models six times. This is the first reduction since August 2023; Tesla slightly raised prices between October and November when growth of deliveries in China slowed.

The Gigafactory, Tesla’s largest production hub worldwide, has an annual capacity of about 1 million units.

Aside from deliveries to mainland customers, the Shanghai factory also shipped 344,078 vehicles to markets like Japan and Germany in 2023, up 26.9 per cent year on year, according to data compiled by the CnEVPost.

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Sales of electric cars in China jumped 37 per cent last year, with deliveries of pure EVs and plug-in hybrids hitting 8.9 million units. At present, mainland China accounts for about 60 per cent of global EV sales.

But sales growth of battery-powered vehicles in mainland China is expected to slow to 20 per cent year on year in 2024, according to a Fitch Ratings’ report in November.

Intensifying competition is piling pressure on the 200-plus Chinese EV makers this year, with some leading players spearheading price cuts to lure customers.

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A new round of price cuts is in effect, with BYD, the world’s largest EV maker, and Xpeng offering discounts to bolster sales.

Early last month, BYD cut the price of its Han luxury car by as much as 20,000 yuan to meet its annual sales target. Xpeng followed by cutting the price of its bestselling G6 SUV by 10,000 yuan, or about 5 per cent.