Tesla announces price cuts in Chinese mainland amid fiercer competition

U.S. electric vehicle maker Tesla Inc. announced that it decided to cut prices in the Chinese market for its Model Y long-range and performance versions from Monday. Industry analysts said the move belongs to normal price adjustment and will unlikely have a significant impact on Chinese local EVs.

But, the analysts are uncertain whether there could be a new round of price war in the sector to boost sales in the Chinese mainland market.

According to a notice on Tesla's Weibo posting, the company cut the starting prices of both models by 14,000 yuan ($1,935). The Model Y Long Range's retail price will be reduced by 4.5 percent to 299,900 yuan and the starting price of the Model Y Performance is now 349,900 yuan, down 3.8 percent.

Tesla said it will offer insurance subsidies in the Chinese mainland market of 8,000 yuan for Model 3 buyers for entry-level, rear-wheel-drive versions of the Model 3 .

In addition to Tesla, a dozen of EV makers in China have recently announced price reductions. Zeekr announced on Friday it will offer price cuts for its 001 model ranging from 30,000 ($4,148) to 37,000 yuan, valid for the rest of the year, while Leapmotor announced on August 1 it will offer price cuts of between 10,000 to 20,000 yuan on some models.

"This round of price cut is normal due to falling input costs. It's normal market practice to readjust prices in line with their marketing strategies, which will unlikely have any big impact on the healthy development of the domestic EV sector," Cui Dongshu, secretary general of China Passenger Car Association, told the Global Times on Monday.

It's common for gasoline-fired vehicle manufacturers to cut prices during summer to ramp up sales during the slack season, and now many EV makers have adopted similar measures, he said, noting that it's hard to predict whether EV carmakers will trigger a price war.

China's National Development and Reform Commission vowed in July to continue to stabilize and expand the consumption of automobiles in the country, pointing out measures to optimize the purchase, use and management of automobiles, as well as the automobile market, and to promote sustainable development of the new-energy vehicle industry.

In the first half of 2023, China's NEV output expanded 42.4 percent year-on-year to nearly 3.79 million units, and NEV sales surged 44.1 percent year on year to almost 3.75 million units, data from the China Association of Automobile Manufacturers revealed.