Tesla Inc. (NASDAQ: TSLA) moves down 2.42% to $209.25 in pre-market session on Monday as it has reduced starting costs for its Model 3 and Model Y cars in China by up to 9%, reversing an industry-wide trend of hikes amid signs of slowing demand in the world’s largest auto market.
The price reductions, which were disclosed on the electric vehicle (EV) giant’s China website on Monday, are Tesla’s first in China in 2022, and come after the company began giving limited incentives to consumers who choose Tesla’s insurance last month.
The price cutbacks come after Tesla CEO Elon Musk claimed last week that “a form of recession” was underway in China and Europe, and Tesla announced that it will miss its car delivery target this year. Last week, Musk told analysts that demand was robust in the current quarter and that Tesla will be “recession-resistant.”
According to China Merchants Bank International (CMBI), Tesla’s pricing cuts highlight the rising competitive danger for Chinese EV manufactures, with industry-wide sales expected to decrease through 2023.
An analyst with CMBI, Shi Ji stated that the price cuts underscore the possible price war which they have been emphasising since August.
According to data released on Monday, retail sales in China increased 2.5% in September, falling short of the predicted 3.3% increase and falling short of August’s 5.4% increase.
Analysts are warning of a developing automotive inventory glut in China, where auto sales growth slowed in September and EV sales climbed at the slowest rate in five months.
Because of growing raw material costs, the American carmaker and numerous Chinese competitors have raised pricing several times since last year. However, Tesla has constantly altered its car costs in China, including discounts to reflect government incentives.
Tesla informed Reuters that it was raising price to reflect rising costs. According to the company, capacity utilization at its Shanghai Gigafactory has increased, while the supply chain has remained constant despite the economic effect of China’s severe zero-COVID requirements, resulting in cheaper prices.
Last week, CMBI analysts cautioned that 2023 would bring increased competition to the EV market, predicting that sales growth for EVs and hybrids combined would fall below 50%.
Tesla is now China’s third best-selling EV manufacturer, trailing only BYD Motor and SAIC-GM-Wuling, and is the only foreign company on the China Passenger Car Association’s top 15 list.