Tesla has kicked off the new year with an aggressive bid to expand its presence in the Chinese market, lowering by 15% the price of its domestically made, base version of the Model 3 following months of speculation.
Why it matters: Tesla’s latest price reduction is expected to shake up the Chinese electric vehicle (EV) industry, as the move is likely to grab market share in the short-term from rivals it is undercutting.
- A more affordable Model 3 is expected to catalyze EV adoption as consumers attracted by the high-profile performance EV will help lift the electric car market over the long-term.
- Competitors such as Nio and global luxury car makers such as Daimler and BMW may feel the pinch. Nio’s lower-price model, its ES6 SUV, costs RMB 338,000 after the subsidy, while the starting price of Mercedes Benz’s EV, the EQC SUV, is nearly double that of locally built Model 3 after applying the subsidy.
Details: Tesla on Friday revealed the long-rumored reduction of its cheapest Model 3 version by dramatically lowering the starting price of the standard-range model by more than 15%. The China-made Model 3 now starts at RMB 299,050 ($42,920), according to the company’s website.
- The price reduction includes a subsidy of around RMB 25,000, which China’s Ministry of Industry and Information Technology granted the company last month.
- Beijing also exempted Model 3 buyers from a 10% purchase tax of around RMB 26,000. The company reduced the sticker price by 9% to RMB 323,800, but warned that the final sale price is subject to change in accordance with government policies.
- The prices for the all-wheel drive models remained unchanged.
- Tesla is scheduled to deliver the first batch of China-built Model 3 sedans to consumers on Tuesday.
Context: Tesla late last year reported robust 48% year-on-year revenue growth to $2.14 billion in China for the first three quarters. A report by well-known auto market blogger, Chang Yan, said that the company’s sales target in China could increase 500% to 250,000 units in 2020 as a result of the price reduction.
- Tesla delivered 10,542 units in China for the first three quarters of 2019, according to figures from consulting firm LMC Automotive, falling short of rival Nio by nearly 7,000 units.