SHANGHAI, Jan 6 (Reuters) – Tesla (TSLA.O) cut its prices in China for the second time in less than three months on Friday, stoking expectations of a wider price war for electric vehicles in the world’s largest auto market where demand has weakened.
Tesla also cut prices on its best-selling Model Y and Model 3 cars in Japan, South Korea and Australia in what a person with direct knowledge of the plan said was part of an effort to help stoke demand for output from its Shanghai factory, which is the U.S. automaker’s single largest production hub.
It was also the first major move by Tesla since appointing its lead executive for China and Asia, Tom Zhu, who has been based in Shanghai, to oversee global output and deliveries.
Tesla shares fell 4.5% in premarket trading.
Automakers have long turned to incentives in the face of weaker demand to control inventory, but, until late last year, Tesla had been able to keep prices steady – or even to push them higher – because of a strong pipeline of orders.
Last month, Musk said “radical interest rate changes” had affected the affordability of all cars, new and used, and that Tesla could lower pricing to sustain volume growth
The latest cut in China, along with another in October and incentives for Chinese buyers over the past three months, mean a 13% to 24% reduction in Tesla’s prices from September in its second-largest market after the United States, Reuters calculations showed.
Tesla slashed prices for all versions of its Model 3 and Model Y cars in China by between 6% to 13.5%, according to Reuters calculations based on the prices on its website. The starting price for the Model 3, for instance, was cut to 229,900 yuan ($33,427) from 265,900 yuan.
Grace Tao, Tesla’s vice president in charge of external communications in China, posted on her Weibo social media account that Tesla’s price cuts in China reflected engineering innovation and “answer the government’s call to promote economic development and encourage consumption”.
Deliveries of Tesla’s China-made cars hit their lowest in five months in December.
END OF SUBSIDIES
The cuts came days after Beijing ended a subsidy programme, with softening demand forcing Tesla and its rivals to absorb the brunt of that decision.
China Merchants Bank International (CMBI), which warned in July that China’s EV sector was headed for a price war, said that Tesla may have to do more, especially as competition with Chinese rivals intensifies.
“Tesla needs to further cut prices and expand its sales network in China’s lower-tier cities amid ageing models,” said CMBI analyst Shi Ji.
“We expect new EV production capacity in China to outpace new demand in 2023 and Tesla Shanghai’s capacity utilisation could drop to about or even below 80% this year if its Berlin plant ramps up.”
The Shanghai plant, which was expanded last year, also exports vehicles to Europe, although there was no immediate indication of price cuts there.
But Sun Shaojun, a popular China…
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