Tesla Inc (NASDAQ:TSLA) has reignited an electric car price war in China, sending shares in Elon Musk’s company down again in pre-market trading.
Only last month, Musk vowed to keep up the pressure on rivals with more cuts and at the weekend cut prices on its China-made vehicles, including the Model Y long-range and performance models, by 4.5% and 3.8%, respectively.
Tesla also introduced insurance subsidies for the entry-level Model 3 until 30 September in response to intensifying competition that has seen a 31% drop in July's China-made Tesla sales.
Musk, Tesla's chief executive, has indicated that he's willing to sacrifice margins for higher production volume and they declined to 18.2% in the second quarter of 2023, a four-year low.
Analysts suggest Tesla had little choice given price cuts last week by Geely to its Zeekr brand and Zhejiang Leapmotor Technology, another EV manufacturer. It has sparked fears that the US firm’s aggressive pricing points to a lack of a long-term strategy to bolster margins.
So far, increased sales from the lower price have kept Tesla moving forward with a record level of deliveries, but a 17% decline in share price value over the past month reflects market fears the strain might be showing.
China has emerged as a powerhouse in battery-powered electric vehicles in recent years with manufacturers in countries such as the UK warning that an invasion of cheap imports is about to swamp domestic businesses.