Tesla slashes prices in China by up to 9% as analysts warn of ‘price war’

SHANGHAI, Oct 24 (Reuters) – Tesla (TSLA.O) has slashed starter prices for its Model 3 and Model Y cars by up to 9% in China, reversing an upward trend across the industry amid signs of slowing demand in the world’s biggest car market.

The price cuts, posted Monday on the electric vehicle (EV) giant’s Chinese website, are Tesla’s first in China in 2022, and come after Tesla began offering limited incentives to buyers who switched to the insurance from Tesla last month.

The price cuts come after Tesla CEO Elon Musk said last week that “some kind of recession” was underway in China and Europe and Tesla said it would miss its vehicle delivery target This year.

Musk told analysts last week that demand was strong in the current quarter and said he expected Tesla to be “recession resistant.”

China Merchants Bank International (CMBI) said Tesla’s price cuts underscored growing competitive risk for electric vehicle makers in China, with industry-wide sales expected to slow through 2023.

“The price declines underline the possible price war that we have been insisting on since August,” said CMBI analyst Shi Ji.

Monday’s data showed retail sales in China rose 2.5% in September, below the expected 3.3% rise and less than half August’s 5.4% growth. .

Analysts are warning of a growing car inventory glut in China, where auto sales growth slowed in September while electric vehicle sales rose at their slowest pace in five months. Read more

The U.S. automaker and several Chinese rivals have repeatedly hiked prices since last year amid rising raw material costs. But Tesla has also regularly adjusted the prices of its cars in China, including discounts, to reflect government subsidies.

Tesla told Reuters it was adjusting prices based on cost. Capacity utilization at its Shanghai Gigafactory has improved, while the supply chain remains stable despite the impact on the economy of China’s strict zero-COVID restrictions, driving down costs, a- he declared.

The Model 3 sedan’s starting price has been reduced to 265,900 yuan ($36,727) from 279,900 yuan, while that of the Model Y sport utility vehicle has been reduced to 288,900 yuan from 316,900 yuan, according to prices. of the products listed on its Chinese website.

The average price of a new Tesla in the United States, the EV maker’s biggest market, has been rising steadily since last year and was just under $70,000 in August, according to research firm Kelley Blue Book.

Tesla upgraded its Shanghai factory earlier this year in a development that has boosted the factory’s weekly production capacity to around 22,000 units from levels of around 17,000 in June, Reuters previously reported. .

Tesla delivered 83,135 Chinese-made electric vehicles in September, an 8% increase from August, and set a production record for the Shanghai factory since production began in December 2019. read more

CMBI analysts warned last week that 2023 would bring more competition to the electric vehicle sector, saying they expected to see sales growth of electric and hybrid vehicles on a combined basis fall below 50%. Read more

Tesla is currently the third best-selling electric vehicle maker in China after BYD Motor (002594.SZ) and SAIC-GM-Wuling (GM.N)(600104.SS), and is the only foreign player in the top 15 list. first published by China. Passenger Car Association.

CMBI said it expects other automakers to be forced to cut prices for battery electric cars and plug-in hybrids, like Tesla due to a planned increase in production capacity. next year.

($1 = 7.2399 Chinese Yuan)

Reporting by Zhang Yang and Brenda Goh; Editing by Kenneth Maxwell

Our standards: The Thomson Reuters Trust Principles.