Tesla cuts prices in China by up to 9% amid warnings of “price war”

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SHANGHAI – Tesla It has cut starting prices for its Model 3 and Model Y cars by as much as 9% in China, reversing a trend of sector-wide increases amid signs of slowing demand in the world’s biggest car market.

The price cuts, published on listings on the electric vehicle (EV) giant’s website in China on Monday, are Tesla’s first in China in 2022, and come after Tesla began offering limited incentives to buyers who opted for Tesla insurance last month.

The price cuts come after Tesla CEO Elon Musk said last week that “a kind of recession” is occurring in China and Europe, and Tesla said it will miss its vehicle delivery target this year.

Musk told analysts last week that demand was strong in the current quarter and said he expected Tesla to be “recession-resistant.”

China Merchants Bank International (CMBI) said Tesla’s price cuts underscored the growing competitive risk for electric vehicle makers in China, while industry-wide sales are forecast to slow in 2023.

“The price cuts underscore the potential price war we’ve been emphasizing since August,” said Shi Ji, an analyst at CMBI.

Data on Monday showed retail sales in China grew 2.5% in September, below the expected 3.3% rise and less than half August’s 5.4% growth.

Analysts warn of a growing glut of cars in China, where auto sales growth slowed in September, while sales of electric vehicles rose at their slowest pace in five months.

The U.S. automaker and several Chinese competitors have raised prices several times since last year against a backdrop of rising raw material costs. However, Tesla has also regularly adjusted the prices of its cars in China, including rebates, due to government subsidies.

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Tesla told Reuters it was adjusting prices accordingly. Capacity utilization at its Shanghai Gigafactory has improved, while the supply chain remains stable despite the impact on the economy of China’s strict zero COVID restrictions, leading to lower costs, he said.

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