Screenshot of Tesla’s China website showing the Model 3 price reduction. (Image credit: TechNode)

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.

Tesla Model 3 price cut could jolt China market: analysts

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 More by Jill Shen

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