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Tesla collapses in New York with price war in China

Tesla has cut prices by almost $2,000 on all its models in China. Chinese carmaker Li Auto cut prices by about five per cent on four of its five models

22 April 2024

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Tesla has cut prices by almost $2,000 on all its models in China, following price cuts in the US, as it grapples with declining sales and an intensifying price war for electric vehicles (EVs), particularly against cheaper Chinese EVs.

The Elon Musk-owned electric vehicle manufacturer has cut the starting price of the revamped Model 3 in China by 14,000 yuan ($1,930) to 231,900 yuan, according to its website.

Tesla has made similar cuts to the starting price of the Model Y, now 249,900 yuan, the regular Model S at 684,900 yuan and the Model S Plaid at 814,900 yuan. The regular Model X now costs 724,900 yuan and its plaid variant 824,900 yuan.

The carmaker on Friday cut the prices of its Model Y, Model X and Model S vehicles in the US by $2,000. On Saturday it cut the price of its Full Self-Driving assistance software from $12,000 to $8,000 also in the US.

The collapse of Tesla

Tesla collapsed in New York in the wake of the new round of the price war in China as fierce competition with local electric vehicle manufacturers is pushing down sales prices and players to focus more on exports. Li Auto also closed at -8.33% on the Hong Kong Stock Exchange, at its lowest level in 11 months, discounting the downward revision of the price lists. Tesla, in particular, cut the prices of its Model 3 by about USD 2,000 and Li Auto, as for its models such as the L7, L8, L9 and the newly launched MEGA SUV, reduced them by 6-7%. Other electric car manufacturers such as Nio (-1.66%), and Xpeng (-1.85%) came under pressure, while global leader BYD limited the damage to -0.20%. The Chinese smartphone manufacturer Xiaomi, which launched its SU7 electric car earlier this month, priced it at around $4,000 less than Tesla's Model 3, also ensuring a much longer driving range.

Tesla reported this month that global vehicle deliveries in the first quarter fell for the first time in almost four years as price cuts failed to stimulate demand.

The electric vehicle manufacturer has been slow to renew its obsolete models as high interest rates have weakened consumer appetite for big-ticket items, while rivals in China, the world's largest car market, are launching cheaper models.

Travel to India postponed

Musk has postponed a planned trip this weekend to India, where he was due to meet Prime Minister Narendra Modi, citing Tesla's obligations. The trip was supposed to include an announcement of Tesla's plans to enter the South Asian market, Reuters reported on Saturday.

On Monday, Musk said Tesla will lay off more than 10 per cent of its global workforce as the carmaker prepares for its first annual drop in deliveries.

The announcement came after Reuters reported on 5 April that Tesla had abandoned its plan to develop its long-awaited affordable electric vehicle in favour of robotaxis. Musk wrote that "Reuters is lying" after the report, without citing any inaccuracies. He did not speak further about the model, leaving investors to demand clarity.

Tesla's shares have fallen 40.8 per cent this year.

Since late 2022, Tesla has triggered a price war as Musk pursued volume growth at the expense of margins.

The Li Auto move

After Sunday's move by Tesla came Monday's move by Chinese carmaker Li Auto, which cut prices by around 5 per cent on four of its five models and said it would refund owners who had bought those models earlier this year, exacerbating the price war in the country.

The move by Li Auto, China's most popular extended-range hybrid seller, comes after price cuts by US carmaker Tesla and after BYD, the world's largest electric vehicle manufacturer, revised prices downwards.

Li Auto announced cuts of between 18,000 and 30,000 yuan ( $2,485-4,142) on its L7, Li L8, Li L9 and Li MEGA models and said that owners who had already retired those models this year would also receive cash refunds. The company had already offered rebates on some models in January.

Last week it launched a new extended-range electric vehicle, the Li L6, and claimed that the vehicle had sold more than 10,000 units within 72 hours of its launch.

The price war in the world's largest car market started early last year with Tesla's cuts and has since involved dozens of carmakers. Other carmakers that have cut prices this year are Geely Auto, GAC Aion, Leapmotor and Xpeng.