Tesla could snatch market share from rival Chinese electric vehicle (EV) makers in the near term as price cuts lure customers away from rivals and sales continue to grow at a steady pace this year, according to analysts.
While Tesla has cut prices of its China-made cars twice in three months amid faltering demand, its Chinese rivals like Nio, Xpeng and Li Auto have not budged on prices.
“Tesla and other EV makers suffered a setback in November and December due to the Covid-19 pandemic as Beijing revised its virus-control policies,” Paul Gong, a UBS analyst, said on Thursday. “But its sales could rebound in January and February buoyed by its price cuts.”
The possibility of Tesla raising prices later this year when its sales rebound, however, cannot be ruled out, Gong added.
Tesla marked down its prices twice since late October, driving prices of Model 3s and Model Ys to their lowest levels since its first vehicle rolled off the wholly foreign-owned factory in December 2019.
Tesla adjusts prices of its locally built vehicles frequently in China based on the cars’ production costs, according to Grace Tao, the company’s head of communications and government affairs in China.
On October 24, Tesla offered discounts of up to 9.4 per cent on the Model 3 and Model Y vehicles, before slashing prices by as much as 13.5 per cent on January 6.
The price cuts coincided with a drop in demand for premium battery-powered vehicles in China as lay-offs in the technology industry and the pandemic-ravaged economy are pushing buyers towards cheaper, locally made electric cars, instead of imported models or foreign brands like Tesla.
In December, Tesla delivered 29,387 Model Ys, the bestselling premium SUV in China, marking a decline of 44 per cent month on month, according to data from the China Passenger Car Association (CPCA). Sales plunged 27.4 per cent on a year-on-year basis.
The Texas-based carmaker also handed over 12,539 Model 3 sedans to customers last month, 24.5 per cent higher than the 10,069 units in November. But the figure was 58.3 per cent lower than the 30,102 units delivered in the same month in 2021.
“The bigger discounts that saved buyers of Tesla cars at least 50,000 yuan (US$7,400) are set to lure wealthy customers from its Chinese rivals,” said Eric Han, a senior manager at Suolei, an advisory firm in Shanghai. “The price reductions will deal a heavy blow to the Chinese smart EV bellwethers.”
Since October 24, the price of a basic Model 3 has fallen 18 per cent to 229,900 yuan while prices of comparable models such as Nio’s ET5 and Xpeng’s P7 have stayed flat at 328,000 yuan and 239,9000 yuan, respectively.
Meanwhile, EV deliveries may increase by 26 per cent to 8.5 million units in 2023, according to a forecast by the CPCA, a drastic deceleration from last year’s 96 per cent surge to 6.5 million.
At the same time, the number of EV makers fighting for a share of the market has fallen by half to around 200 compared with three years ago.
January will be a particularly short month in Tesla’s production cycle. The Shanghai Gigafactory will be switched on for only 17 days this month, with production taking place between January 2 and January 19, ahead of the Lunar New Year break that begins two days later, according to a Reuters report.
Tesla, which was dethroned by Chinese carmaker BYD as the world’s largest EV builder last year, has seen its shares plunge by two-thirds over the past 12 months. It rose 3.7 per cent to US$123.22 on Wednesday.
Its CEO Elon Musk is no longer the world’s richest person, dropping to second place behind LVMH CEO Bernard Arnault in December.
Keyword: Tesla’s heavy price cuts could revive sales growth as rivals Nio, Xpeng and Li Auto hold back on discounts