SHANGHAI, Jan 6 (Reuters) – Tesla (TSLA.O) cut prices for electric cars in China for the second time in less than three months on Friday, stoking expectations of a wider price war for battery-powered vehicles in the world’s largest car market where demand has weakened.
Tesla has also slashed the prices of its best-selling electric vehicles, the Model Y and 3, in Japan, South Korea and Australia.
The coordinated price cuts were part of an effort to boost demand for Tesla’s production at its Shanghai factory, the company’s largest production hub, according to a person with direct knowledge of the plan.
It was also the electric vehicle maker’s first major move since Tesla appointed its China and Asia managing director, Shanghai-based Tom Zhu, to oversee global production and deliveries.
The latest drop in China, along with a price cut in October and incentives given to Chinese buyers over the past three months, means a 13% to 24% price cut for Tesla from September in its second-largest market. after the United States, according to Reuters calculations.
On Friday, Tesla slashed the prices of all versions of its Model 3 and Model Y cars in China by 6% to 13.5%, according to Reuters calculations based on prices listed on its website. The Model 3’s starting price, for example, has been reduced to 229,900 yuan ($33,427) from 265,900 yuan. It cut prices in Japan on the same day.
Grace Tao, Tesla’s vice president of external communications in China, posted on her Weibo social media account on Friday that Tesla’s price cuts in China reflect technical innovation and “respond to the government’s call to promote economic development and encourage consumption”.
Deliveries of cars made in China by Tesla hit a five-month low in December.
The cuts came just days after Beijing ended a subsidy program that helped build the world’s largest electric vehicle market. Slowing demand has forced Tesla and its rivals to absorb the brunt of this decision.
China Merchants Bank International (CMBI), which warned in July that China’s electric vehicle sector was heading for a price war, said Tesla’s price cut confirmed the prediction, adding that the US company may have to do more. , especially as competition with its Chinese rivals intensifies. .
The Model 3 and Y have been the only models Tesla delivers to China, although on Friday it announced Model S and Model X pricing in the country.
“Tesla still needs to cut prices and expand its sales network in lower-tier Chinese cities amid aging models,” said CMBI analyst Shi Ji.
“We expect new electric vehicle production capacity in China to exceed new demand in 2023 and Tesla Shanghai’s capacity utilization could drop to around or even below 80% this year if its Berlin is gaining momentum.”
BYD (002594.SZ), which has a wider variety of offerings including both plug-in and pure electric vehicles, saw retail sales in China double in December while Tesla’s fell 42% , according to data from CMBI.
Tesla had no further comment when contacted by Reuters. A Tesla spokesperson referred Reuters to Tao’s Weibo post.
Tesla’s rebates brought the Model 3’s starting price down to the same level as BYD’s best-selling Han EV sedan, which starts at 219,800 yuan. The Chinese electric vehicle maker recently raised prices for its best-selling models after losing central government subsidies.
Sales of BYD’s Han series, including plug-in hybrid versions, were more than double those of Model 3s in China in the first 11 months, according to the China Passenger Car Association.
Prices in China for Model 3 and Model Y cars are now 24% to 32% lower than in the United States, Tesla’s biggest market, according to Reuters calculations, for reasons including material costs and different workforces.
Tesla also slashed the prices of Model 3 and Model Y cars by about 10% each in Japan, the first time since 2021. The price of the rear-wheel-drive Model 3 version is now 5.369 million yen ($40,091) , down from 5.964 million yen.
($1 = 6.8775 Chinese Yuan)
($1 = 133.9200 yen)
Reporting by Zhang Yan and Brenda Goh; Editing by Kim Coghill and Muralikumar Anantharaman
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