Tesla cuts prices in China by up to 9% as demand slumps and price war looms

SHANGHAI (Reuters) – Tesla cut the starting prices for its Model 3 and Model Y cars by 9% in China, reversing increases across the industry amid signs of waning demand in the world’s largest auto market as analysts warn. price war.

The price cuts, posted in listings on the electric vehicle (EV) giant’s China website on Monday, are the first by Tesla in China in 2022, and come after Tesla began offering insurance incentives to buyers last month.

The move to cut some prices by about a tenth comes after Tesla CEO Elon Musk said last week that a “recession of sorts” in China and Europe was putting pressure on demand for its electric cars.

Data on Monday showed global retail sales No. The second economy grew 2.5% in September, less than the expected 3.3% rise and less than half the 5.4% growth rate in August. Analysts are warning of a rising inventory glut in China, where car sales growth slowed in September while electric vehicle sales rose at their slowest pace in five months.

The US automaker and several Chinese competitors have raised prices several times since last year amid rising raw material costs. But Tesla has also regularly adjusted prices for its cars in China, including cuts, reflecting government support.

Tesla told Reuters it is adjusting prices in line with costs. Capacity utilization at Shanghai Gigafactory has improved, while the supply chain remains stable despite the impact on the economy of the strict restrictions on the non-spread of the Corona virus in China, which has led to lower costs, she said.

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The starting price of the Model 3 car has been reduced to 265.900 yuan ($36,727) from 279,900 yuan, while the price of the Model Y SUV has been reduced to 288,900 yuan from 316,900 yuan, according to product prices listed on its Chinese website.

Reuters previously reported that Tesla upgraded its Shanghai plant earlier this year in a development that raised the plant’s weekly production capacity to about 22,000 units, compared to levels of about 17,000 in June.

Tesla delivered 83,135 China-made electric vehicles in September, up 8% from August, and set a production record for the Shanghai plant since production began in December 2019.

But China Merchants Bank International (CMBI) analysts warned last week that 2023 will bring more competition to the electric vehicle sector, saying it expects to see sales of electric and hybrid vehicles on a combined basis drop below 50%.

“The price cuts underscore the potential price war we’ve been emphasizing since August,” said Shi Jie, an analyst at CMBI.

“Given Tesla’s capacity expansion in the third quarter of 2022 we expect other New Energy Vehicle (NEV) makers to follow suit, as China’s new energy capacity will increase significantly next year.”

(dollar = 7.2399 Chinese yuan)

(Reporting by Zhang Yang and Brenda Goh; Editing by Kenneth Maxwell)

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