Tesla rekindles EV price war with new round of cuts

BEIJING — Tesla Inc. cut prices in China on the Model Y long-range and performance versions, sending auto stocks tumbling on concerns the move will rekindle an international price war that had shown signs of abating.

Beginning Monday, the automaker dropped the starting prices of both Model Y models by 14,000 yuan ($1,934.58). The Model Y Long Range's starting price drops 4.5 percent to 299,900 yuan and the starting price of the Model Y Performance is now 349,900 yuan, down 3.8 percent.

In the same announcement, Tesla also said it would offer insurance subsidies in China of 8,000 yuan for buyers of entry-level, rear-wheel-drive versions of the Model 3 in inventory between Aug. 14 and Sept. 30.

Last month Tesla CEO Elon Musk said further price cuts were a possibility, even if it squeezed the automaker's margins.

The EV price cuts that have roiled the industry this year have also encouraged some prospective buyers to wait on the sidelines for further reductions, some anaysts believe.

The reductions may presage “similar select cuts” in the U.S. and Europe soon, Chris McNally, an analyst with Evercore ISI, said in a note. That would pressure the company’s third-quarter profit margin, he added.

Tesla has slashed prices several times in the U.S., China and other markets since late last year, and increased discounts and given other incentives to reduce inventory, trying to shield itself against competition and economic uncertainty.
 

Sales of Tesla's China-made vehicles fell 31 percent in July from June, data from China Passenger Car Association showed earlier this month, marking its first month-on-month decline since December. The automaker announced last month that global production would drop in the third quarter due to downtime for factory upgrades, without offering specifics. It’s expected to start making a revamped version of the Model 3 sedan soon.

Geely’s Zeekr brand lowered prices as much as 37,000 yuan last week, while Zhejiang Leapmotor Technologies cut its prices by as much as 20,000 yuan at the start of the month.

Tesla triggered the price war with an initial round of cuts last year before further discounts in January that left Tesla’s locally made cars as much as 14 percent cheaper than last year, and in some cases almost 50 percent less expensive than in the U.S. and Europe.

“Price competition has been and will remain an ongoing theme in China’s auto market,” said Joanna Chen, an auto analyst at Bloomberg Intelligence. “Tesla is trying to keep volume rolling after July sales showed its slowing order intake without new models to attract Chinese buyers.”

Green car sales in China declined in July from June, though purchases shifted toward major players with BYD, Li Auto and Nio all reporting new sales records.

Bloomberg contributed to this report.