Tesla Sparks Renewed Competition in Electric Vehicle Prices in China
Auto stocks took a hit as Tesla Inc. reduced prices once more in China, raising concerns about the resurgence of a global price war that seemed to be calming down.
The automaker cut the Long Range and Performance versions of the Model Y SUV by 14,000 yuan ($1,900) to 299,900 yuan and 349,900 yuan, respectively, according to a post on its Weibo account. Tesla also extended an 8,000 yuan insurance subsidy for the base version of the Model 3 sedan, which will keep the benefit valid until the end of next month.
The reductions, which are about 4.5% and 3.8% for the two Model Y versions, could foreshadow “similar selective cuts” in the U.S. and Europe soon, Evercore ISI analyst Chris McNally said in a note. This would put pressure on the company’s third quarter profit margin, he added.
Tesla’s moves follow moves by Geely Automobile Holdings Ltd.’s Zeekr brand, which dropped prices by as much as 37,000 yuan last week, and by Zhejiang Leapmotor Technologies Ltd., which dropped by as much as 20,000 yuan earlier in the month. . Tesla started the price war with the first cut late last year, making some of its models almost 50% cheaper than in the US and Europe.
Tesla shares were down 2.9% at 9:43 a.m. in New York trading. Rivian Automotive Inc. and Lucid Group Inc. also declined. China’s best-selling car manufacturer BYD Co. fell 6.2% in Hong Kong, while shares of Li Auto Inc., Xpeng Inc. and Leapmotor fell.
“Price competition has been and will be a constant theme in China’s auto market,” said Joanna Chen, an auto analyst at Bloomberg Intelligence. “Tesla is trying to maintain volume growth after July sales showed a slowdown in orders without new models to attract Chinese buyers.”
Tesla’s deliveries from the Chinese factory fell 31% in July to the lowest level this year. The automaker said last month that global production would fall in the third quarter due to shutdowns for factory upgrades, but did not provide further details. It is expected to start making a facelifted version of the Model 3 sedan soon.
Although shipments of plug-in vehicles in China fell in July from June, BYD, Li Auto and Nio Inc. all set new shipment records.
Tesla CEO Elon Musk warned last month that the automaker will have to keep cutting prices if interest rates continue to rise. Several rounds of discounts have already burdened the company’s gross margin percentage in the automotive industry, which fell to its lowest level in four years in the second quarter.
A number of automakers, including Tesla and BYD, pledged early last month to maintain fair competition and avoid “abnormal pricing” in China, only to cancel the deal days later due to antitrust concerns.
