Automotive Expotrs November 2022

Tesla slashes China prices by up to
9% as analysts warn of ‘price war’
Tesla has cut starter prices for its Model
3 and Model Y cars by as much as 9%
in China, reversing a trend of increases
across the industry amid signs of softening
demand in the world’s largest auto market.
The price cuts, posted in listings on the
electric vehicle (EV) giant’s China website,
are the first by Tesla in China in 2022, and
come after Tesla began offering limited
incentives to buyers who opted for Tesla’s
insurance.
The price cuts come after Tesla Chief
Executive Elon Musk said that “a recession
of sorts” was underway in China and
Europe and Tesla said it would miss its
vehicle delivery target this year.
Musk told analysts that demand was
strong in the current quarter and said he
expected Tesla to be “recession-resilient.”
China Merchants Bank International (CMBI)
said Tesla’s price cuts underlined the
growing competitive risk for EV makers in
China, with industry-wide sales projected
to slow into 2023.
“The price cuts underscore the possible
price war which we have been emphasizing
since August,” said Shi Ji, an analyst with
CMBI.
Data showed retail sales in China grew
2.5% in September, below the expected
3.3% rise and less than half of August’s
5.4% growth.
Analysts are warning of a growing car
inventory glut for autos in China, where
auto sales growth slowed in September
while EV sales rose at their slowest pace in
five months.
The U.S. automaker and several Chinese
rivals have hiked prices several times since
last year amid rising raw material costs. But
Tesla has also regularly adjusted the prices
of its cars in China, including reductions,
reflecting government subsidies.
Tesla told Reuters it was adjusting prices
in line with costs. Capacity utilization at its
Shanghai Gigafactory has improved, while
the supply chain remains stable despite the
impact on the economy of China’s stringent
zero-COVID restrictions, leading to lower
costs, it said.
The starting price for the Model 3 sedan
was reduced to 265,900 yuan ($36,727)
from 279,900 yuan, while that for the
Model Y sport utility vehicle was cut
to 288,900 yuan from 316,900 yuan,
the product prices listed on its Chinese
website showed. The average price for
a new Tesla in the United States, the EV
maker’s largest market, has been climbing
steadily since last year and was just
under $70,000 in August, according to
research company Kelley Blue Book. Tesla
upgraded its Shanghai factory earlier this
year in a development that brought the
factory’s weekly output capacity to around
22,000 units compared with levels of
around 17,000 in June, Reuters previously
reported. Tesla delivered 83,135 Chinamade
EVs in September, an 8% increase
from August, and set an output record
for the Shanghai factory since production
began in December 2019.
CMBI analysts warned that 2023 would
bring more competition to the EV sector,
saying that it expected to see sales growth
for EVs and hybrids on a combined basis to
drop below 50%. Tesla is currently China’s
third best-selling EV maker after BYD Motor
and SAIC-GM-Wuling, and is the only
foreign player in the top 15 list published
by the China Passenger Car Association.
CMBI said it expected that other
automakers would need to cut prices
on battery-electric and plug-in hybrid
cars, following Tesla’s lead because of a
projected increase in production capacity
next year.
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