Tesla is suddenly a major market disrupter in China with 50% discount being offered across its entire range of cars
True to his style, Elon Musk has created havoc in the Chinese EV market by giving a massive 50% discount on all Tesla cars. This move has pretty much caught the competition off guard, who are now trying to come up with strategies to counter Tesla’s move. Experts opine that this move could drive some rivals out of business, while others seem to be struggling to reshape their strategies.
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Tesla Wages Major Price Wars in China
By January 2023, the locally produced models of Tesla witnessed a price reduction of 14 per cent as compared to last years. In fact, some of its models were priced at just 50% of what they cost in Europe and USA. The drop in prices led to all rivals revising the prices of their offerings. These included major carmakers like Volkswagen and Mercedes Benz as well as local startups such as Xpeng Inc and Nio Inc. Following the price cuts, the Ford Mach-E now costs only 66% of what it does in the USA. As per several local reports, over 30 carmakers have reduced their prices following Tesla models becoming more affordable.
Speaking on the development, Jochen Sibert, Managing Director, JSC Automotive said:“Tesla wreaked havoc on the rest of the market.” Meanwhile, earlier this week, China Association of Automobile Manufacturers strongly recommended ending price wars, stating that it’s not a long-term solution to sales slowdown.
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Subsidies
Many industry experts have said that it’s unethical on the government’s part to offer incentives to locally produced cars. These subsidies are being offered to help the car market come out of the turmoil caused by the pandemic. In spite of the recommendation, though, the incentives seem to have doubled the sales of electric vehicle and other new energy vehicles as compared to 2018. For instance, last November, Tesla created a new monthly sale record by dispatching more than 100,000 EVs from its Shanghai facility to the dealerships.
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As per Steven Feng, CFO, Nio Inc, the Chinese car industry is undergoing “a very profound reshuffle. We expect the industry to go through some profound fundamental consolidation after this price war. It’s almost universally agreed that China now has too many automakers.” With more than 155 new EV and PHEV models scheduled to launch in China this year, we can see more price cuts coming from larger, better established players. As per JSC Automotive’s Sibert, Tesla enjoys a corpus of “several billion dollars that they can use for this purpose while others do not.”
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