China Merchants Bank International (CMBI), which warned in July that China’s EV sector was headed for a price war, said Tesla’s price reduction affirmed the prediction, and said the U.S. firm may have to do more, especially as competition with its Chinese rivals intensifies.
The Model 3 and Y have been the only models Tesla delivers in China, though on Friday it announced prices for the Model S and Model X in China.
“Tesla needs to further cut prices and expand its sales network in China’s lower-tier cities amid ageing models,” said CMBI analyst Shi Ji.
“We expect new EV production capacity in China to outpace new demand in 2023 and Tesla Shanghai’s capacity utilization could drop to about or even below 80% this year if its Berlin plant ramps up.”
BYD, which has a much larger variety of offerings that comprise both plug-in and pure electric vehicles, saw its retail sales in China double in December while Tesla’s fell 42%, according to data from CMBI.
Tesla did not offer any additional comment when contacted by Reuters, and a spokesperson only referred to Tao’s Weibo post.
The car maker’s discounts have brought the starting price of Model 3 to the same level of BYD’s best-selling Han EV sedan, which is sold from 219,800 yuan. The Chinese EV maker recently raised the prices for its best selling models after losing the central government subsidies.
Sales of BYD’s Han series, including the plug-in hybrid versions, were more than double that of Model 3′s in China in the first 11 months, according to the China Passenger Car Association.
The China prices of the Model 3 and Model Y cars are now 24% to 32% lower than those in the United States, Tesla’s largest market, Reuters calculations showed, due to reasons including different material and labour costs.