Tesla on Friday slightly increased the after-subsidy prices of two popular China-made Model 3 versions, immediately after Beijing announced a 10% cut in government incentives for electric vehicle purchase.

Why it matters: China’s latest adjustment for EV buying is expected to force Tesla into making tough choices: margins or market share.

  • Four Chinese ministry-level authorities on Thursday announced a 10% cut from the subsidies for new energy vehicles, which include all-electric and plug-in hybrids.
  • Beijing for the first time stipulated that luxury EVs priced RMB 300,000 (around $42,400) and above will not receive any subsidy.
  • The policy gives companies like Nio an exemption: EVs with swappable batteries will not be affected.

Details: The standard range plus version of the made-in-China Model 3 is now rising by RMB 4,500 to RMB 303,550 after-subsidies, while the purchase price of the long range version is up by RMB 5,000 to RMB 344,050, according to Tesla’s website.

  • The company acknowledged that customers are now required to cover the price and tax difference. The subsidy for the standard range plus version has been cut from RMB 24,750 to RMB 20,250 after the adjustment, a similar rate of decline to the long range version.
  • Nio changed its tune on Friday morning, saying in an announcement that it will make up the additional cost for customers, if they pay non-refundable deposits by the end of this week.
  • The subsidy for its all-new ES8 SUV with an 84kwh battery pack was reduced by 10% to RMB 22,500 for personal customers after the adjustment, while that of ES6 dropped even further by 28% to RMB 18,000.
  • Meanwhile, Li Xiang, founder of Meituan-backed EV maker Lixiang, made a bigger promise saying that “there is no need” for its potential customers to worry, since the company will cover the cost for them, without giving a timeframe.

Context: With a price range starting at RMB 323,800 before subsidies, the made-in-China Model 3 is currently eligible for the latest incentives over the next three months, but will be disqualified for that once the transitional period closes on July 22.

  • “Tesla is not going to sacrifice profit to cover the additional cost for customers in the transitional period,” a Tesla Model 3 owner surnamed Lin told TechNode on Friday.
  • Still, analysts expect the policy change could pressure to Tesla to further slash prices to expand its market share, resulting in an accelerated process of localization in Model 3 production in its Shanghai facilities, investment banks China International Capital Corporation (CICC) and Citic Securities said on Friday.
  • China previously offered customers for RMB 25,000 ($3,550) as incentives for EVs with a range of over 400 kilometers. This is now reduced to RMB 22,500. The actual cut varies among EV models and could be at around 30% in some cases, depending on the driving range, energy density of battery pack, and energy consumption levels.

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