In a strategic move to boost sales and regain market momentum, Tesla (TSLA.O) announced a significant price reduction for its premium Model S and Model X vehicles in China. The American electric vehicle (EV) manufacturer stated on Wednesday that it had lowered prices by up to 6.9% for existing inventories of these models.
Tesla shared the news via its official account on the popular Chinese social media platform Weibo. The price adjustments were highlighted in a post that detailed the revised costs for both the Model S and Model X. Specifically, the cost of the Model S was reduced by 6.7%, bringing its price down to 754,900 yuan ($103,477.58) from the previous 808,900 yuan. Meanwhile, the Model X now boasts a starting price of 836,900 yuan, reflecting a 6.9% decrease from its former price of 898,900 yuan.
This pricing strategy follows Tesla’s recent decision to lower the prices of the long-range and performance versions of its Model Y in China, effective August 14. While these moves aim to stimulate demand and enhance the company’s competitive stance in the Chinese EV market, concerns have arisen regarding their potential impact on Tesla’s profit margins.
The decision to slash prices comes after a notable decline in the sales performance of Tesla’s China-made vehicles. Sales figures for July revealed a substantial 31% drop compared to June. This marked the first month-on-month sales decline since December. The dip in sales was attributed to Tesla’s temporary suspension of some production operations, which were carried out to prepare for the launch of an upgraded version of the Model 3.
In contrast to Tesla’s situation, Chinese automaker BYD (002594.SZ) reported an increase in sales during the same period. This highlights the fierce competition within the Chinese EV market, where local manufacturers strive to capture and retain a significant share of the rapidly expanding sector.
The pricing adjustments made by Tesla signal the company’s determination to regain momentum and recapture market share in China. However, the potential impact on profit margins raises questions about the sustainability of these price cuts in the long term. As Tesla navigates through this dynamic market landscape, industry experts and investors will keenly monitor the company’s performance in the coming months.
(Conversion rate: $1 = 7.2953 Chinese yuan renminbi)