In the face of increased competition and an economic slowdown, Tesla has cut down the prices of its electric vehicles in mainland China anywhere from 5% to 9%. At present, Tesla’s Model 3 and Model Y cars have been adjusted to 265,900 RMB ($37,070) and 288,900 RMB ($40,276) respectively.
Following the announcement of the price cut, Tesla shares fell more than 6% as investors worried about the company’s profitability and increasing competition. This comes after Tesla CEO Elon Musk said that a “recession of sorts” was underway in China and Europe and that Tesla would miss its vehicle delivery target this year. However, Musk insisted that Tesla will remain “recession-resilient” with strong demand in the current quarter.
Meanwhile, on Chinese social media platform Weibo, news of the price cut spread like wildfire, raising questions about the potential impacts of the price reduction. So far, the hashtag “Tesla’s official announcement of price cuts triggered rights protection” has amassed a whopping 170 million views. Another hashtag “How does Tesla’s price cut affect the market?” has garnered over 33 million views.
In China, Tesla faces competition from homegrown EV companies such as BYD, SAIC Motor and Nio, which are currently pushing into the European market with more affordable electric vehicles. With support from the Chinese government, these homegrown carmakers are looking to challenge established foreign carmakers.
“China’s the biggest EV market in the world, and you could argue that it’s the most competitive because it’s got the most players, including homegrown companies like BYD giving Tesla a real run for their money,” said Autotrader analyst Michelle Krebs.
All things considered, Tesla’s price cut is an indication of a slowdown in economic growth coupled with intensifying competition in the world’s largest EV market. However, whether Tesla is truly at risk of losing its leadership spot in China’s EV space or whether this is just a bump in the road, only time will tell.