Tesla, the world’s leading electric vehicle maker, has announced another round of price cuts in China, its second-largest market. The company reduced the prices of some of its models by up to 8,500 US dollars, as it faces increasing pressure from domestic rivals and a slowing economy.
Model Y and Model 3 get cheaper
On Monday, Tesla said it would lower the prices of two versions of its Model Y SUV by 14,000 yuan (1,929 US dollars) each, effective immediately. The long-range model will now cost 299,900 yuan (41,340 US dollars), while the performance model will be priced at 349,900 yuan (48,200 US dollars), according to Tesla posts on Chinese social media and its website1.
Additionally, buyers of Tesla’s Model 3 sedan will receive a subsidy of up to 8,000 yuan (1,107 US dollars) if they purchase the car through a preferred insurance provider through the end of September, the company said1.
The price cuts come after Tesla reported a 31% drop in China-made electric vehicle deliveries in July compared to June2. The company sold 64,285 vehicles in July, down from 92,857 in June2.
Model S and Model X also get discounts
On Wednesday, Tesla slashed the prices of its existing inventory of Model S sedans and Model X SUVs in China as well. The Model X is on sale for 836,900 yuan (114,677 US dollars) down from 898,900 yuan previously, while the Model S is now offered at 754,900 yuan (103,444 US dollars), reduced from 808,900 yuan3.
The price reductions apply only to the vehicles that are already in stock and not to new orders. Tesla said the discounts were due to “market changes” and “inventory adjustments” in a post on Weibo3.
Tesla also rolled out a cheaper version of its Model S and Model X vehicles in the US this week. These are not new issues, but are range limited by software. The company said it was offering these vehicles “while supply lasts” on its website4.
Tesla faces rising competition in China
Tesla’s price cuts reflect the intense competition it faces in China, the world’s biggest auto market and a key growth driver for the company. China accounted for nearly a quarter of Tesla’s revenue in the second quarter of this year5.
Tesla competes with both global and local players in China’s electric vehicle sector. Some of its rivals include Warren Buffett-backed BYD, Nio, Xpeng and Li Auto. These companies have been ramping up their production and innovation capabilities, as well as offering lower-priced models to attract customers.
Tesla also faces regulatory challenges in China. The company has been under scrutiny from authorities over issues such as data security, customer service and vehicle quality. In July, Tesla recalled nearly 300,000 cars in China over a software update that could cause sudden acceleration6.
Tesla has been trying to improve its image and relationship with Chinese consumers and regulators. The company has apologized for some of its missteps and pledged to comply with local laws and regulations. It has also opened a data center in China to store and process data locally.
Tesla CEO Elon Musk has expressed confidence in the company’s prospects in China. He said in April that he expected Tesla to achieve “very strong” growth there over the long term. He also said that Tesla would expand its network of charging stations and service centers in China to enhance customer experience.