A customer in Tesla’s Xintiandi showroom in Shanghai on March 11, 2019. (Image credit: Yu Dingzhang/TechNode)

Tesla is reportedly planning to slash the price of its made-in-China Model 3 sedan model by at least one-fifth next year, plans that precede any actual deliveries from the US electric vehicle giant’s Shanghai Gigafactory. Analysts see the move as a critical catalyst for the country’s struggling auto market in the coming year.

Why it matters: While Tesla’s China rivals may fear a price cut from the US carmaker, industry analysts believe it could boost the market in the long run.

  • Sales in the world’s largest electric vehicle (EV) market have slumped for more than a year and a half amid economic headwinds.
  • Cui Dongshu, secretary general of the China Passenger Car Association, said last month that there was much room for a price reduction of the Chinese Model 3, up to 30%. It currently costs RMB 355,800 ($50,800) for the base model, well above the US starting price of $35,000.
  • Such a reduction in the price of a Model 3 could lift overall Chinese EV sales, he added.

Details: Tesla may slash the sales price of the made-in-China Model 3 by more than 20% in the second half of next year by increasing local parts procurement to avoid tariffs, according to a Bloomberg report citing people familiar with the matter.

  • The savings are uncertain and may change according to the market, a source added. A company spokesperson declined to comment on the veracity of the reports on Wednesday, stating (in Chinese) only that “nothing has been made official.”
  • The US EV maker has long been looking to reduce costs. The strategy includes a reported battery supply deal with South Korea’s LG Chem, which produces domestically in Nanjing.

Context: Investment bank China International Capital Corporation (CICC) forecast on Wednesday that China-built Model 3s could boost China’s EV consumer sales by 10% to up to 600,000 units next year.

  • CICC expects slower growth of between 10% and 20% for the EV consumer segment next year, which accounted for about half of the country’s 1 million EVs sold in 2019.

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Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric vehicles. Connect with her via e-mail: jill.shen@technode.com

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