Tesla has dropped prices of some new China Model 3 and Model Y cars in the country, the latest move by the US carmaker to boost sales amid weaker demand in its two most significant markets. The price of the new entry-level China Model 3 dropped to 245,900 yuan, and that of the refreshed long-range Model Y to 299,900 yuan. Both vehicles are now at their lowest prices in China since Tesla began assembling the SUVs in the country at its Gigafactory in 2021.
The price cuts come after Tesla reported third-quarter deliveries that missed market expectations. The company’s stock fell 2.9 percent in premarket trading. Tesla says it made the adjustments because its production costs for the Model 3 and Y have increased over time, and it is adjusting prices to reflect those changes.
In the past, Tesla has regularly adjusted pricing for its vehicles in China depending on the company’s production costs. It has also offered special incentives to buyers in the country to help offset the higher production costs. The company offers Chinese customers free Enhanced Autopilot and Full Self-Driving for the Model 3 and Model Y, respectively. These features are not available in the United States.
Tesla’s moves to cut prices are likely to eat into its margins, which have been pressured by rising interest rates in the country and competition from Chinese start-ups such as Li Auto, Nio, and Xpeng. The Chinese EV start-ups recently reported lofty monthly sales that lifted sales in the world’s largest electric car market. Beijing-based Li handed over 34,134 vehicles to customers in July, and Shanghai-based Nio and Xpeng posted record shipments.
Analysts say that Tesla is taking the step because it wants to maintain its lead in the fast-growing global EV market and to keep cash flowing into its “gigafactories,” where it plans to build more production capacity. It also wants to develop additional business streams, such as vehicle services, EV charging, and credits.
Analysts say the move may presage similar selective price cuts in the United States and Europe. The steep discounts may also signal that Tesla is stepping up its efforts to boost production at its facilities in China to meet demand.
Unlike the US, where Tesla is based, China’s domestic auto market has slowed this year as the economy slows and consumers become more cautious. But the country remains a leading exporter of automobiles, and sales of new-energy vehicles are booming. The industry association forecasts that China’s EV shipments will reach 8.5 million units in 2023, a 50 percent increase over last year.