Tesla Inc (NASDAQ:TSLA) has shown it is willing to go to war to grow its presence in China as it slashed prices to compete toe-to-toe with local electric car makers, with price cuts also made in Australia, Japan and South Korea.
Under-par sales of its popular electric vehicle (EV) models in the People’s Republic were flagged as a particular weak spot in the company’s recent fourth-quarter production update.
“The major worry now overhead for Tesla is that the demand story especially out of China is showing heavy cracks in the armor at a time that EV competition is steadily increasing domestically… and others fighting for a smaller pie with the Chinese consumer weakening,” warned long-time Tesla bull Dan Ives of Wedbush Securities.
“With China representing 40%-plus of the global growth story for Tesla, this is a heavy concern for the Street which will likely result in more significant price cuts over the coming months to spur demand as a potential pricing war takes place to gain market share in a darker macro backdrop.”
It seems founder Elon Musk and his team heeded the warnings on Wall Street by cutting the cost of its vehicles.
The latest price cut, along with a reduction in October and various incentives worth up to CNY10,000 ($1,542) offered to Chinese buyers over the past three months, mean a 13% to 24% reduction in Tesla's prices from September, according to Reuters.
On Friday, the US EV maker slashed prices for all versions of its Model 3 and Model Y cars in China by between 6% and 13.5%, reducing prices in Japan, South Korea and Australia on the same day.
The price cuts come after Tesla's China-made car deliveries reached their lowest point in five months in December, and just days after Beijing ended a subsidy programme that helped build the world's largest EV market.