Tesla cut the prices of the Model 3 and the Model Y in China, its website revealed today. The prices are down by as much as nine percent, as analysts warn that a price war may be coming in the world’s biggest electric vehicle market.
Prices for the Model 3 went down from 279,900 yuan to 265,900 yuan ($38,523 USD to $36,609 USD at current exchange rates), while prices for the Model Y fell from 316,900 yuan to 288,900 yuan ($43,631 to $39,776 USD), per Reuters.
As a result of the price cuts, CNBC reports that Tesla’s share prices fell by as much as 7 percent in New York this morning. Tesla is China’s third best-selling EV manufacturer, behind BYD Motor and SAIC-GM-Wuling.
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That marks the first time in 2022 that Tesla has lowered prices for its cars. In fact, the move reverses a trend among a number of EV manufacturers in the country, who have been incrementally increasing prices to account for the growing costs of raw materials.
The China Merchants Bank International (CMBI), though, said that Tesla’s price cut is part of a wider trend affecting automakers in the country. As industry-wide sales appear set to slow next year, a possible “price war” could ensue.
Sales for each automaker are expected to slow further as 2023 is set to introduce more competition into the market. The CMBI expects other manufacturers to cut prices, too, because of an expected rise in production capacity next year, per Nikkei Asia.
Indeed, Tesla just completed upgrades at its Shanghai factory this year that brought output capacity up from 17,000 to 22,000 units per week. That happened shortly before China’s market started cooling. In September, sales in the country grew 2.5 percent, but that’s half as much as they grew in August (5.4 percent) and even less than they were expected to have grown by (3.3 percent).