Tesla cut initial prices for the Model 3 and Model Y by up to 9 percent in China, after several analysts warned of a “price war,” according to Reuters.
It’s Tesla’s first price cut in China so far this year, and comes after CEO Elon Musk said last week that a “sort of slack” in China and Europe was putting pressure on demand for the company’s electric vehicles.
Moreover, he claimed that Tesla is in a good position, but many other companies are not.
Analysts at China’s CMBI Bank believe the price cut shows the growing competition for electric car manufacturers in China, as car sales are estimated to decline in 2023, according to the newspaper.
“The price cuts underscore the potential price war we have been stressing since August,” said Shi Jie, an analyst at CMBI.
To Reuters, Tesla says they are adjusting prices in line with costs.
“Capacity utilization at Shanghai Gigafactory has improved, while the supply chain has remained stable, resulting in lower costs,” she said.
- The starting price of the Model 3 has been reduced by five percent, to 265,900 yuan, equivalent to 387,000 Norwegian kroner.
- The starting price of the Model Y has been reduced by nearly nine percent, to 288,900 yuan, equivalent to 421,000 Norwegian kroner.
Tesla delivered 83,135 Chinese-made electric cars in September, a new monthly record, and an 8 percent increase from August. The company has set a production record for the Shanghai plant since production began in December 2019.
CMBI analysts warned last week that electric car manufacturers will face stronger competition in 2023. Meanwhile, they expect sales of electric and hybrid cars to drop on an aggregate basis to less than 50 percent.
Expect weak economic growth in China
Economists also predict that China will have problems reaching this year’s growth target, which is around 5.5 percent.
The International Monetary Fund cut its forecast for China’s GDP growth to 3.2% for 2022 and 4.4% next year.
In September, China’s retail sales grew 2.5 percent, less than expected by 3.3 percent, and less than half of August’s 5.4 percent growth.
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