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Tesla cuts car prices in China, other Asian markets due to low demand

SHANGHAI, Jan 6 – Tesla cut electric car prices in China for the second time in less than three months on Friday, fueling expectations of a wider price war for battery-powered vehicles in the world’s biggest auto market. where demand weakened.

Tesla also cut the prices of its best-selling Model Y and Model 3 electric vehicles in Japan, South Korea and Australia.

The coordinated price cuts were part of an effort to help boost demand for Tesla’s output at its Shanghai factory, the company’s single largest manufacturing hub, according to a person with direct knowledge of the plan.

It was also the electric vehicle maker’s first major move since Tesla appointed its China and Asia chief, Tom Zhu, who is based in Shanghai, to oversee global production and deliveries.

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The latest cuts in China, along with price cuts in October and incentives extended to Chinese buyers over the past three months, mean a 13% to 24% price cut for Tesla since September in its second-largest market after the United States. according to Reuters calculations.

Tesla on Friday cut prices of all versions of its Model 3 and Model Y cars in China by between 6% and 13.5%, according to Reuters calculations based on prices listed on its website. The starting price for the Model 3, for example, was cut to 229,900 yuan ($33,427) from 265,900 yuan. On the same day, it cut prices in Japan.

Grace Tao, Tesla’s vice president in charge of external communications in China, posted on her Weibo social media account on Friday that Tesla’s price cut in China reflects technical innovation and “responds to the government’s call to promote economic development and encourage consumption.”

Shipments of Tesla cars made in China hit a five-month low in December.

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The cuts came just days after Beijing ended a subsidy program that helped build the world’s largest EV market. Weakening demand has forced Tesla and its rivals to absorb the brunt of the decision.

China Merchants Bank International (CMBI), which warned in July that China’s electric car sector was heading for a price war, said Tesla’s price cuts confirmed the prediction, adding that the US firm may have to do more, especially as competition from Chinese rivals intensifies . .

The Model 3 and Y were the only models Tesla is shipping in China, although it announced prices for the Model S and Model X in the country on Friday.

“Tesla needs to further cut prices and expand its sales network in lower-tier Chinese cities amid aging models,” CMBI analyst Shi Ji said.

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“We expect new EV production capacity in China to outpace new demand in 2023, and Tesla Shanghai’s capacity utilization could drop to around or even below 80% this year if its Berlin plant is up and running.”

BYD ( 002594.SZ ), which has a much larger range of offerings that include both plug-in and pure electric vehicles, saw its retail sales in China double in December, while Tesla fell 42%, according to CMBI data.

Tesla offered no further comment when contacted by Reuters. A Tesla spokesman referred Reuters to Tao’s Weibo post.

Tesla’s discounts put the Model 3’s starting price on par with BYD’s best-selling Han EV sedan, which starts at 219,800 yuan. The Chinese electric car maker recently raised the prices of its best-selling models after losing government subsidies.

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Sales of BYD’s Han series, including plug-in hybrid versions, were more than double those of the Model 3 in the first 11 months in China, according to the China Passenger Car Association.

China’s Model 3 and Model Y prices are now 24% to 32% lower than those in the United States, Tesla’s biggest market, Reuters calculations showed, for reasons including various material and labor costs.

Tesla also cut the prices of the Model 3 and Model Y by about 10% each in Japan for the first time since 2021. The price for the rear-wheel drive version of the Model 3 is now ¥5.369 million ($40,091), a decrease. from ¥5.964 million.

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