West News Wire: As demand declines in the largest auto market in the world, Tesla has reduced pricing in China for the second time in less than three months, fueling predictions of a bigger price war.
A person with direct knowledge of the plan said that the US automaker also reduced the cost of its best-selling Model Y and Model 3 electric vehicles in Japan, South Korea, and Australia as part of an effort to boost demand for the output from its Shanghai factory, which serves as its main production hub.
The change is the company’s first significant action since appointing Tom Zhu as its chief executive for China and Asia to oversee global production and deliveries, which have been at the center of recent issues for the company after falling short of its 2022 delivery target.
Tesla shares fell 2.5 percent in active trading Friday. The stock has lost 70 percent of its value in the past year.
Automakers have long turned to incentives to control inventory, but until late last year, Tesla had been able to keep prices steady or even raise them due to strong orders.
But last month, CEO Elon Musk said “radical interest rate changes” had affected the affordability of all cars, new and used, and that Tesla could cut prices to sustain volume growth.
The latest cut in China, along with another in October and recent incentives for Chinese buyers, mean a 13 percent to 24 percent reduction in Tesla’s prices from September in its second-largest market after the United States, Reuters calculations showed.
Tesla slashed prices for all its Model 3 and Model Y cars in China between 6 percent and 13.5 percent, according to Reuters calculations based on the website prices. The starting price for the Model 3 was cut to 229,900 yuan ($33,427) from 265,900 yuan ($38,661).
Grace Tao, Tesla’s vice president in charge of external communications in China, said on Weibo that the price cuts in China reflected engineering innovation and answered Beijing’s call to encourage economic development and consumption.
Deliveries of Tesla’s China-made cars hit their lowest number in five months in December. Tesla’s Shanghai plant, which was expanded last year, also exports vehicles to Europe.
So far, there has been no sign of Tesla cutting prices in Europe, where sales jumped 93 percent in November year-on-year, according to sales data from the research group JATO Dynamics, and in 2022, the Model Y was the top-selling car for the second time.
Tesla also saw its share of Europe’s battery electric vehicle market jump to 18.9 percent in November from 12.3 percent in the same month a year earlier.
Tesla implemented the price cuts days after Beijing ended a subsidy programme. Softening demand is forcing Tesla and its rivals to absorb the brunt of the move.
China Merchants Bank International (CMBI) said Tesla may have to do more, especially as competition with its Chinese rivals intensifies.
Some Tesla owners in China who took delivery in recent months and did not qualify for the reduced prices said on Friday that they planned protests at Tesla showrooms in Shenzhen and Henan, screenshots of social media chats seen by Reuters showed.