Tesla has reduced the prices of its existing inventory of Model S and Model X cars in China in an effort to boost sales and remain competitive in a key market facing increasing competition. The price cut for the Model X is from 898,900 yuan to 836,900 yuan, and for the Model S, it’s from 808,900 yuan to 754,900 yuan. This comes after Tesla previously lowered prices for the Model Y and Model 3 in China.
The company’s strategy of offering discounts to gain market share and boost sales has raised concerns among investors about the impact on profit margins. Tesla reported operating margins of 9.6% in the June quarter, the lowest in at least the last five quarters.
The discounts have also led to fears of a price war in the Chinese electric vehicle market, potentially affecting smaller players like Xpeng, Nio, and Li Auto. These companies saw their shares decline in response to Tesla’s price cuts.
China’s economy is still recovering from the effects of the COVID-19 pandemic, and consumers remain cautious about spending. Tesla’s aggressive pricing strategy is seen as an attempt to attract consumers and maintain its market share despite the challenging economic conditions.
Michael Dunne, CEO of auto consulting firm ZoZoGo, noted that Tesla’s sustained aggressive price cuts in the Chinese market are pressuring its competitors to respond with their own price reductions, impacting their profitability. Tesla sold 64,285 China-made electric vehicles in July, a 31% decrease from the previous month, according to the China Passenger Car Association.
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