Tesla China Denies Price Reduction, Chinese Auto Firms Still Feel Pressure

On 30 September, Chinese media outlet Huxiu Auto reported that Tesla’s China-made Model 3 and Model Y will undergo significant price reductions. The maximum price cut for the Model Y was expected to reach 40,000 yuan ($5,623), while the starting price for a Model Y rear-wheel drive version would eventually drop to between 270,000 yuan and 290,000 yuan ($37,954 – $40,766). On the morning of the same day, Tesla China responded, claiming that this is “false information.”

The global electric vehicle giant enjoys strong brand power, supply chain control and market popularity in China, and its expansion of production, price reductions and cutting of costs have brought a shock to the local new energy vehicle market.

Model Y (Source: Tesla)

Tesla has expanded its production several times. The firm’s second-quarter financial results show that Gigafactory Shanghai has completed a capacity upgrade project, achieving annual production of more than 750,000 units. The Shanghai factory has become the Tesla facility with the highest production capacity in the world, surpassing the California site.

In August this year, Tesla’s wholesale volume in China reached 76,965 units, up 172.8% month-on-month. However, its sales volume in China during the second quarter of this year dropped from 310,000 in the first quarter to 254,700 – as much as 18% lower. In an effort to boost third-quarter delivery, Tesla China recently introduced a time-limited insurance subsidy of 8,000 yuan for the domestic market. This is the first time that Tesla has offered a disguised price reduction for its Model 3s and Model Ys after several price increases in China previously in 2022. In addition, Reuters reported that Tesla China is planning to close its showrooms in cities like Beijing and move them to the periphery of cities to reduce costs.

Although Tesla has denied the rumor of price reductions, according to a report by Huxiu Auto, the news has already had a certain impact on the pricing strategy and rhythm of new products released by XPeng Motors and Li Auto.

XPeng G9
XPeng G9 (Source: XPeng)

On September 21, the long-awaited XPeng G9 was officially launched, with selling prices ranging from 309,900 to 469,900 yuan. For XPeng, the G9 SUV is its well-deserved flagship model in terms of product level, intelligent configuration, selling price and positioning. However, within 48 hours of its release, Xpeng Motors announced an overhaul, which has resulted in a price reduction of 20,000 yuan. Not only has the basic version of the model been cut down, but all car configurations, discounts and names have also been changed.

SEE ALSO: XPeng Adjusts G9 SUV’s Name, Price and Configuration Two Days after Release

As for Li Auto, after the sales volume of its Li ONE model fell and production was about to stop, and after the Li L9’s air suspension was reported to be malfunctioning, rumors that Tesla was about to reduce the price of the Model Y also became one of the reasons forcing the company to release the Li L8 in advance.

Li L8 (Source: Li Auto)

The stress brought by Tesla to China’s smart car industry has also spread to other companies. A few days ago, Huawei-backed Avatr recently launched new favorable polices. As long as orders are made before October 31, this batch of consumers of the Avatr 011 and Avatr 11 models will be entitled to a lifetime free full-vehicle and battery, motor and electric control system warranty. On this basis, users of its main model, the Avatr 11, will also receive new benefits, such as a free high-level smart driving system and personalized configuration discounts.