As analysts foresee a “price war,” Tesla reduces prices in China by up to 9%

In China, the world’s largest auto market, Tesla (TSLA.O) has reduced the starting rates for its Model 3 and its Model Y automobiles by as much as 9%, bucking a trend of hikes in the sector.
The price reductions, which were announced in postings on the electric vehicle (EV) behemoth’s China webpage on Monday, are the company’s first in the country for 2022.
Last month, Tesla started providing a small number of incentives to customers who choose to purchase its insurance.
Early trading saw stocks of the Austin, Texas-based company down 4.9% to $203.9.
The price reductions also come after Tesla CEO Elon Musk claimed last week that “a form of recession” was happening in Europe and China, and Tesla said it will miss its vehicle delivery target for the year.

Last week, Musk told analysts that the current quarter’s demand was robust and that he anticipated Tesla to be “recession-resistant.”
With industry-wide sales expected to slow through 2023, China Merchants Bank International (CMBI) stated that Tesla’s pricing reductions highlighted the growing competition danger for EV makers in China.
The price reductions highlight the potential price war that is being spoken of since August, or so is said by Shi Ji, a CMBI analyst.
While Tesla increased pricing in the United States, its biggest market, over the last year due to rising raw material costs, it had previously slashed prices in China in an attempt to be more competitive there.
Retail sales in China increased 2.5% in September, less than half the 5.4% growth in August and less than the predicted 3.3% increase, according to data released on Monday.
In response to growing raw material costs, the U.S. automakers and numerous Chinese competitors have increased pricing several times since last year.
But Tesla constantly makes adjustments to its car costs in China, including price cuts that reflect government incentives.
Tesla is currently the third-best-selling EV manufacturer in China, after SAIC-GM-Wuling (GM.N)(600104.SS) and BYD Motor (002594.SZ), and it is the only foreign company to make the top 15 list compiled by the Chinese Passenger Car Association.
According to U.S. Tiger Securities specialist Bo Pei, the price reduction is mostly the result of China’s general weak auto demand brought on by macroeconomic factors and competition with the country’s largest participant BYD.
According to Pei, XPeng, Nio Inc., and Li Auto must follow or else face increased volume pressure.
Tesla disclosed that it was raising pricing to reflect rising costs. It claimed that its Shanghai Gigafactory’s capacity utilisation has increased and that the supply chain is still stable despite the negative economic effects of China’s tough zero-COVID regulations. This has reduced expenses.
Product pricing stated on its Chinese website that the starting price for the Model 3 sedan was lowered to 265,900 yuan ($36,727) from around 279,900 yuan and the starting price for the Model Y sport utility vehicle was lowered to 288,900 yuan from 316,900 yuan.
Tesla updated its Shanghai factory early this year, and in September it delivered 83,135 EVs built in China, setting a record for the facility’s output since it started producing vehicles in December 2019.
Meanwhile, given the economic crises that cast a shadow on the industrial and automakers market, Tesla is doing significantly well trying to uphold its ideals. If any prospects and future deals fall through within the conclusion of this year, they might end 2022 as one of the leading benefactors if they make the right choices as supported by the public.