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Tesla (NASDAQ:TSLA) announced today it slashed prices of China-made basic Model 3 and Model Y.
Model 3 will now start from 265,900 yuan (down from 279,900) while Model Y’s new price is 288,900 yuan, down from 316,900. These cuts partly offset price hikes imposed earlier this year.
Lower prices may be a result of the slowing demand for EVs in China after recent media reports suggested wait times for Tesla’s products have shortened.
“China is experiencing a recession of sorts,” CEO Elon Musk said last week.
Bank of America analysts believe Tesla was forced to make a move due to “recent slower EV penetration growth, and TSLA’s shorter waiting time for Model 3/Y after it increased monthly capacity to above 80k after July.”
“We expect Model 3/Y volume sales to improve, given: (1) the entry price of Model 3 is lowered by 4.7%, and Model Y’s is lowered by 8.9%; (2) TSLA’s price change has been long awaited by Chinese consumers, thus they were in a wait-and-see mode earlier,” they said in a client note.
On what new prices would mean for local rivals Nio (NYSE:NIO), Xpeng (NYSE:XPEV), BYD (OTC:BYDDY), and Li Auto (NASDAQ:LI), the analysts added:
“We see the impact could be manageable for NIO, XPeng, etc. Li’s L8 is Extended Range EV (EREV), thus its targeted clients are different from Model Y’s. For Model 3, major peers’ products are XPeng’s P7, BYD’s Han and Seal, and Leapmotor’s C01. We don’t exclude the possibility of Xpeng, BYD or Leapmotor adjusting their pricing strategies if TSLA’s price cut impacts Chinese peers’ volume sales in a significant manner.”
Shares of Tesla are down over 3% in pre-open Monday.
