Tesla slashes prices in China, struggling to keep a competitive edge in luxury EVs segment in booming market

Tesla has implemented price cuts of up to 6 per cent on its Shanghai-manufactured vehicles as it seeks to maintain its dominant position in the premium segment of the world’s largest electric vehicle (EV) market. The reduction in prices applies to the entry-level version of the Model 3 and the starting price of the Model Y, as per a report by Reuters.

Specifically, the starting price of the Model 3 has been reduced from 261,400 yuan to 245,900 yuan, while the Model Y now starts at 258,900 yuan, down from 266,400 yuan. Tesla also lowered the price of the dual-motor version of the Model 3 by 3.9 per cent to 285,900 yuan and offered a 2.1 per cent discount on the dual-motor Model Y, now priced at 299,900 yuan.

These adjustments follow Tesla’s month-on-month sales growth of 15.7 per cent to 75,805 units in mainland China in December, according to data from the China Passenger Car Association. The price cuts are seen as a strategic move to fend off competition from Chinese domestic EV manufacturers who have been introducing new intelligent electric cars.

Tesla delivered 603,664 EVs manufactured at its Shanghai Gigafactory to Chinese buyers in 2023, marking a 37.3 per cent increase from the previous year. The growth rate closely mirrors the 37 per cent sales rise recorded in 2022, where approximately 440,000 vehicles were delivered.

Despite its strong market presence, Tesla’s closest competitor in the premium EV segment, Li Auto, delivered about 376,000 cars in 2023. Tesla adjusts prices regularly based on production costs, with this being the first reduction since August 2023. The Shanghai Gigafactory, Tesla’s largest production hub globally, has an annual capacity of around 1 million units.

Apart from catering to mainland customers, the Shanghai factory shipped 344,078 vehicles to markets such as Japan and Germany in 2023, reflecting a 26.9 per cent year-on-year increase. The Chinese EV market experienced a 37 per cent surge in sales last year, with total deliveries of pure EVs and plug-in hybrids reaching 8.9 million units. China presently contributes about 60 per cent to global EV sales.

(With inputs from agencies)