Tesla Cuts Prices in China Again as Demand Flags

Tesla has trimmed its prices in China again, the second time in under three months, causing speculation of a price war as demand weakens due to monetary tightening measures taking place in developed countries around the world.

The automaker has also cut prices on its best-selling Model Y and Model 3 electric vehicles in Japan, South Korea and Australia as part of efforts to stimulate demand for production from its flagship Shanghai manufacturing hub.

Analysts say the company has had to react to headwinds that caused it to fall short of its 2022 delivery target. Tesla shares fell 2.5% in last week’s trading. The stock has lost 70% of its value in the past year.

The recent price reductions in China, coupled with incentives offered to Chinese buyers, have led to an effective price drop of anywhere from 13% to 24% in Tesla’s prices.

Thus far, Tesla has shown no intention of dropping its prices in Europe, where sales climbed 93% in November year-on-year. Tesla’s share of Europe’s battery electric vehicle market also leapt to 18.9% in November from 12.3% in the same month a year earlier.

Analysts have praised Tesla’s responsive price cuts in China, which have now put its cars in a similar price bracket to smaller competitors like BYD. Tesla Model 3 and Model Y cars in China are now as much as 30% lower in price than those in the US, with Tesla putting the price differential down to different material and labor costs.