Tesla lowers prices in Asian countries due to weak demand
2023.01.07 12:27
Tesla lowers prices in Asian countries due to weak demand
Budrigannews.com – NASDAQ: Tesla On Friday, the world’s largest auto market saw a price cut for the second time in less than three months, leading to predictions of a wider price war and lower demand.
A person with direct knowledge of the plan stated that the U.S. automaker also reduced prices on its best-selling Model Y and Model 3 electric vehicles in Japan, South Korea, and Australia as part of an effort to bolster demand for output from its Shanghai factory, its single largest production hub.
The change is Tesla’s first major move since Tom Zhu, the company’s lead executive for China and Asia, was appointed to oversee global output and deliveries, which have been at the center of the company’s recent difficulties since it missed its 2022 delivery goal.
On Friday, shares of Tesla closed at $113.06, an increase of 2.5%. However, over the past year, the stock has lost 70% of its value.
Tesla had been able to maintain prices or even raise them due to strong orders up until the end of last year, despite automakers’ long-standing use of incentives to manage inventory.
However, Tesla’s CEO Elon Musk stated last month that “radical interest rate changes” had impacted the affordability of all new and used automobiles and that Tesla could reduce prices to maintain volume growth.
According to calculations by Reuters, Tesla’s prices in China, the company’s second-largest market after the United States, have dropped by 13 to 24 percent since September due to the latest cut, another cut in October, and recent incentives for Chinese buyers.
Based on Reuters calculations and website prices, Tesla reduced the prices of all Model 3 and Model Y vehicles in China by 6 to 13.5 percent. The Model 3’s starting price was reduced from 265,900 yuan to 229,900 yuan (or $33,427). According to calculations conducted by Reuters, a number of factors, including labor and material costs, account for the fact that these models now cost between 24% and 32% less than those sold in the United States, Tesla’s largest market.
On Weibo (NASDAQ), Grace Tao, Tesla’s vice president in charge of external communications in China, stated: that Beijing’s call to encourage economic growth and consumption was met by price reductions in China, which reflected engineering innovation.
In December, Tesla’s deliveries of cars made in China reached their lowest level in five months. Vehicles are also exported to Europe from Tesla’s Shanghai plant, which was expanded the previous year.
According to sales data from the research organization JATO Dynamics, sales in Europe increased by 93% in November year-over-year, and the Model Y was the most popular vehicle for the second time in 2022. However, there has been no indication that Tesla will reduce prices there at this time.
In November, Tesla’s share of the European market for battery electric vehicles (BEVs) increased to 18.9%, up from 12.3% the previous year.
Tesla and rivals were compelled to bear the brunt of the move because of the softening of demand days after Beijing ended a program that provided subsidies.
According to China Merchants Bank International (CMBI), Tesla may need to do more, particularly in light of the growing competition from Chinese rivals.
CMBI analyst Shi Ji stated, “Tesla needs to further cut prices and expand its sales network in China’s lower-tier cities amid ageing models.”
“In 2023, we expect new EV demand to outpace new production capacity in China.”
However, a well-known auto blogger from China, Sun Shaojun, stated on Weibo that other automakers, including BYD’s larger rival, would have to respond to Tesla’s substantial price cuts.
Following the end of the government’s subsidies, BYD recently increased the prices of its most popular models.
The Tesla Model 3 cost approximately $1,000 more than the BYD Seal, a model that was introduced in July, after the price reduction. The Han EV, BYD’s best-selling model, is now priced the same as the Model 3.
While BYD stated that it would modify its own pricing in response to shifts in market demand, it declined to comment on the pricing of its rivals.
According to CMBI data, BYD’s retail sales in China doubled in December, while Tesla’s fell 42%. BYD sells pure electric and plug-in vehicles.
According to Reuters screenshots of social media conversations, some Chinese Tesla owners who purchased their vehicles in recent months but were unable to take advantage of the reduced prices announced on Friday that they planned to stage protests at the company’s showrooms in Shenzhen and Henan.
Tesla didn’t say anything else. Reuters was referred to Tao’s Weibo post by a Tesla spokesperson.
In Japan, Tesla also reduced the prices of the Model 3 and Model Y by approximately 10% each, marking the company’s first price reduction since 2021.
Under the Biden administration’s Inflation Reduction Act, which became law in August, the Model Y and Model 3 are eligible for up to $7,500 in clean vehicle tax credits in the United States as of this month.
China was responsible for just over a third of Tesla’s overall sales in 2021.
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