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The price reductions became necessitated when Tesla recorded a very low delivery count in December last year, the lowest in more than 5 months.
American multinational electric vehicle maker, Tesla Inc (NASDAQ: TSLA) has cut the price of its flagship Model 3 and Model Y cars in China. As reported by CNBC, this is the second time since October that the automaker will be making such a move amid growing competition among local auto brands.
According to prices shown on its dashboard, the new starting price for Model 3, for instance, was cut to 229,900 yuan ($33,427) from 265,900 yuan. Generally, the prices of the Model 3 and Model Y have been slashed within the range of 6% and 13.5% respectively. Judging by the total cuts since October, Tesla’s customers in China, its second-largest EV market, will now be getting a discount of up to 10,000 yuan.
Electric Vehicles are considered a game-changing innovation with respect to targeted efforts to combat climate change. As innovative as they are, prices are often a hassle that has largely kept the average customer away from purchasing these EVs. With the latest bouts of price slashes, Tesla is bringing its once-highly-priced cars at par with local players in order to draw more customers.
“Tesla’s price adjustments are backed by innumerous engineering innovations,” Grace Tao, Tesla’s vice president in charge of external communications in China, posted on her Weibo social media account on Friday. ”[They] answer the government’s call to promote economic development and encourage consumption.”
The price reductions became necessitated when Tesla recorded a very low delivery count in December last year, the lowest in more than 5 months. The company had to make the adjustment as the incentive that sutured the industry, and the Chinese government’s subsidy program ended.
Tesla Urged to Cut Price Some More
Despite the latest price cuts, Tesla is being prompted by the China Merchants Bank International (CMBI) to further effect additional price cuts on its electric cars selling in the Chinese market. CMBI had earlier flagged the caution that there may be price wars in the Chinese EV market, a trend that has been confirmed by Tesla’s latest price slash.
“Tesla needs to further cut prices and expand its sales network in China’s lower-tier cities amid ageing models,” said CMBI analyst Shi Ji.
With Tesla also building its GigaFactory in Berlin, Shi Ji believes the Shanghai outlet may have more vehicles for sale than there is demand for if more drastic incentives are extended to buyers.
“We expect new EV production capacity in China to outpace new demand in 2023 and Tesla Shanghai’s capacity utilization could drop to about or even below 80% this year if its Berlin plant ramps up,” he added.
Tesla’s share price slumped by 5.75% in the pre-market to $104. The firm has a lot of grounds to cover in its share price, and enhanced sales that the price slash in China may bring may reboot investors’ confidence in the firm across the board.