Tesla's Aggressive Price Cuts in China Put Pressure on Rival Carmakers

Tesla operated several price cuts in China in a matter of months in a bid to boost sales. However, rival companies were caught off-guard as people started canceling orders to buy Teslas instead. BYD is among the companies affected by Tesla’s price cuts, with the sales of BYD Seal and BYD Han particularly affected.
Kid playing with Tesla's UI 6 photos
Photo: Tesla via Weibo
Tesla's Discount Promo Offer in ChinaTesla's Discount Promo Offer in ChinaProud Tesla Owner from Panziga, the place Now Known as Tesla VillageModel Y in Panziga, the place Now Known as Tesla VillageTesla on the road to Panziga, the place Now Known as Tesla Village
Long before the pandemic changed our lives, Tesla was projected to win over the established car companies thanks to lower costs and a more optimized supply chain. Tesla uses a highly integrated production model, and cost-saving measures were expected to bring down the prices of its electric vehicles to the point where other companies would not be able to compete. Talks of a $25,000 Tesla were not uncommon then, and many thought Tesla’s lead would be there to stay.

Then everything changed, and one crisis after another compounded to further the moment electric vehicles would become as affordable as ICEs. Surprisingly, it’s not Tesla that sells the most affordable EV today, but General Motors with the Chevrolet Bolt. Meanwhile, Tesla started to pursue profits instead of saving humanity through electrification, and its electric vehicles became more expensive, almost prohibitively expensive. Of course, Tesla claimed it was the parts shortages or the inflation, but then it reported the highest operating margins in the auto industry.

This wouldn’t last very long, though, because there aren’t many people willing to pay obscene amounts of money for a car. Economic conditions worsened, and Tesla sales started dwindling in several markets around the globe. Perhaps the biggest problem was China, where Tesla produces the bulk of its vehicles. With such big profits, it was only a matter of time before Tesla decided to cut prices to boost sales. And they did it not once, but several times, making the Model Y up to 43% cheaper in China than in the U.S.

Not only did the price cuts help Tesla sales, but they were enough to crash the demand for other electric vehicles in China. A China Business News report claims that the number of orders in Tesla’s urban stores has increased by up to 500% compared to December. Many are still hesitating to place an order, thinking that Tesla would further lower prices in the near future. At the same time, rivals XPeng, Weilai, smart, Volkswagen, and BYD have seen interest plummeting, especially as they increased prices at about the same time.

A BYD salesperson has confirmed that many reservation holders have started to cancel their orders and transfer to Tesla. The affected models were BYD Han and BYD Seal, both competitors to the Model 3. The same China Business News report claims that the FAW-Volkswagen EV department had an overnight meeting to discuss countermeasures. The price cuts will likely affect all vehicles in the RMB200,000-300,000 price range. These include XPeng P7 and G9 and BYD Han and Seal, among others. Either way, Tesla’s move is expected to reshape the Chinese new-energy (NEV) market in the coming months.
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About the author: Cristian Agatie
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After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
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