Tesla Inc. has announced another round of price cuts for its electric vehicles in China, triggering a slump in the shares of its local rivals. The move comes amid signs of slowing demand for Tesla’s cars in the world’s largest auto market.
Tesla Cuts Model Y Prices by 14,000 Yuan
Tesla reduced the price of the top-end Long-Range and Performance versions of the Model Y sport utility vehicle by 14,000 yuan ($1,900) to 299,900 yuan and 349,900 yuan respectively, according to a post on its Weibo account on Monday. An 8,000 yuan insurance subsidy on newly purchased Model 3 rear-wheel drive vehicles was also extended until the end of next month.
The price cuts follow the likes of Geely Automobile Holdings Ltd.’s Zeekr brand, which lowered prices as much as 37,000 yuan last week. Zhejiang Leapmotor Technologies Ltd. cut by as much as 20,000 yuan at the start of the month.
Tesla triggered the price war with an initial round of cuts last year before further discounts in January that left Tesla’s locally made cars as much as 14% cheaper than last year, and in some cases almost 50% less expensive than in the US and Europe.
Auto Stocks Tumble on Concerns of Price War
The news of Tesla’s price cuts sent auto stocks tumbling on concerns that the move will respark a bruising price war that had showed signs of abating. China’s best-selling auto brand BYD Co. sank 7.6% as of 11:40 a.m. in Hong Kong trading. Li Auto Inc. was down 3.9% lower, Xpeng Inc. fell 6.2% and Leapmotor Technologies Ltd. was off 6.4%.
“Price competition has been and will remain an ongoing theme in China’s auto market,” said Joanna Chen, an auto analyst at Bloomberg Intelligence. “Tesla is trying to keep volume rolling after July sales showed its slowing order intake without new models to attract Chinese buyers.”
Tesla’s China deliveries slumped 31% in July to the lowest level this year — just as the carmaker plans to soon unveil its revamped Model 3 “Highland” sedan from its Shanghai factory.
Tesla Faces Increasing Competition in China
Tesla’s price cuts come at a time when the company is facing increasing competition from both domestic and foreign rivals in China, which accounts for about a quarter of its global sales. The company has also faced scrutiny from regulators and consumers over quality and safety issues, such as battery fires and brake failures.
Some of Tesla’s competitors have been ramping up their production and innovation capabilities, offering more choices and features for Chinese consumers. For example, Nio Inc., which reported record sales in July, has launched a battery-swap service that allows drivers to quickly replace their depleted batteries with fully charged ones at designated stations. Xpeng, which also saw strong sales growth last month, has been investing heavily in autonomous driving technology and smart features.
Tesla is not giving up on its ambitions in China, however. The company is reportedly planning to launch a cheaper model that could cost as low as $25,000 in the country next year. It is also expanding its manufacturing capacity and charging network in China, aiming to maintain its edge over its rivals.