In late 2022, Tesla made the unusual decision to lower the price of its cars in China and the United States in an apparent attempt to boost sales amid low demand. This came as a surprise, as Tesla has had no problem selling every single car it has produced in recent years.
Now the electric carmaker is maintaining discounts, at least in China, to boost sales in the world’s biggest car market, which is critical to the company’s continued growth.
Until the end of February, Tesla is offering Chinese buyers of its Model 3 sedan and Model Y SUV incentives of up to 10,000 yuan, about 1,400 euros at current exchange rates. Tesla also didn’t raise its prices on January 1 to reflect the end of the Chinese government’s subsidy program for electric vehicle sales, meaning it’s absorbing some of that shock.
Slow sales in China – a huge electric vehicle market full of competition – could explain the aggressive price cuts. Despite the new strategy, Tesla’s domestic sales in that country are set to fall nearly 30% between November and December 2022, according to JPMorgan. The bank’s analysts explained in a note to investors in January that the situation in China could get worse before it gets better.
“In the coming months, we are likely to experience a period of temporary pain (with a rise in Covid cases which could impact both car production and consumption) before we are likely to return to a strong recovery phase,” he added. “