Tesla 50% Discount; A Price War has triggered in China, the world’s largest car market, with heavy discounts that could drive some automakers out of business.
The price cuts started in October 2022, when the electric vehicle manufacturer cut prices on models produced at its factory in Shanghai. In January 2023, Tesla offered another discount, leaving its locally-made cars up to 14% cheaper than the previous year and in some cases almost 50% less expensive than in the US and Europe.
The move forced rivals to follow suit, including local start-ups such as Xpeng and Nio, as well as international brands like Volkswagen and Mercedes-Benz.
The China Association of Automobile Manufacturers has called for an end to the price war, stating that it is not a long-term solution to the slowdown in sales and inventory accumulation.
Meanwhile, state media has criticized regional governments for offering subsidies on locally produced vehicles. Hubei province and Dongfeng Motor Group, for example, lowered the price of Citroen C6 models by almost 40%.
Also Read Auto Industry February 2023 Sales, Growth and Volume – Investonomic
Despite the challenges faced by the auto industry due to the COVID-19 pandemic and supply chain disruptions, sales of new energy vehicles, including fully electric and plug-in hybrids, nearly doubled in 2022.
Tesla shipped a monthly record of over 100,000 EVs from Shanghai in November. BYD accounted for around 30% of those sales.
According to Morgan Stanley analysts, including Tim Hsiao and Cindy Huang, the price war initiated by Tesla will expedite a market reshuffle, with BYD and other companies capable of carrying out further price cuts.
However, Fitch Ratings Ltd. warns that companies without sound external funding may face “survival challenges” in the coming two years.
Tesla’s shares dropped after the pricing shifts, but they have since rallied 60% this year, outperforming major Chinese EV makers.
Li Auto’s US depositary receipts have added 15%, while Nio is down 7% in Hong Kong. The price war in China’s auto sector highlights the importance of strategic pricing decisions in the highly competitive global market.
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