In a reversal following a series of hikes his year, Tesla (TSLA) is now cutting prices in China.
The automaker cut prices across the board for its offerings in China, with the entry-level Model 3 sedan dropping by nearly 5% to 279,000 yuan, and the entry level Model Y SUV’s price coming down by 9% to 316,000 yuan.
The price cuts come as concern grows demand may be waning in China due to economic pressures. CEO Elon Musk said as much during last week’s earnings call, claiming “China is experiencing a recession of sorts,” mostly tied to a softening property market.
Tesla did hit an all-time sales high in September, with data from the China Passenger Car Association (CPCA) showing it sold 83,135 China-made EVs. However domestic automakers like BYD, which sold a record 200,973 cars last month, and others like Nio, Li Auto, and Xpeng are giving Tesla strong competition in China’s EV market, which is the largest in the world.
That being said, Wall Street sees the price cuts as a way to boost demand for the time being.
“We expect Model 3/Y volume sales to improve, given: (1) the entry price of Model 3 is lowered by 4.7%, and Model Y’s is lowered by 8.9%; (2) TSLA’s price change has been long awaited by Chinese consumers, thus they were in a wait-and-see mode earlier,” Bank of America analyst Ming Hsun said in a note to clients.
Hsun believes Tesla had to make the price cuts because of slowing EV growth China and increased capacity coming from Giga Shanghai, leading to shorter wait times for orders.
Tesla’s competitors may also engage in a price war sorts, Hsun predicts, in order to maintain a pricing advantage.
“We don’t exclude the possibility of Xpeng, BYD or Leapmotor adjusting their pricing strategies if TSLA’s price cut impacts Chinese peers’ volume sales in a significant manner,” Hsun said.
CMBI analyst Shi Ji warned Tesla's price cuts would lead to competitors following suit. "The price cuts underscore the possible price war which we have been emphasising since August," Ji said.
In addition, Tesla is also looking to gin up sales through rewarding buyers. EV blog Elektrek reports Tesla has restarted its referral program.
Dubbed the “Treasure Chest” Points Rewards program, purchasers can get rewards for getting new buyers to sign up through referral links. Referrers and new buyers now get points that they can use to to be exchanged for rewards like “in-vehicle software upgrades, Tesla accessories, or free Supercharging miles.”
The points can also be used to enter Tesla raffles that occur on a quarterly or annual basis, with prizes like VIP factory visits, up to $45,000 in Tesla boutique purchases, and the ability to use a Model 3 or Model Y vehicle for a year.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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