Tesla slashes prices in China for select Model Y versions

BEIJING, Aug 14 (Reuters) – Tesla ( TSLA.O ) on Monday cut prices for its Model Y long-range and performance versions in China from Aug. 14, sending its shares lower on concerns of pressure on it. Profit margins.

It’s the first time Tesla has cut its vehicle prices in China since January, although the American electric car maker has turned to other incentives in recent months to boost sales in the face of increasing competition.

Sales of Tesla’s China-made vehicles fell 31% in July from June, the first monthly decline since December, as the automaker idled some production to prepare for the launch of the updated Model 3. In contrast, China’s BYD ( 002594.SZ ) increased sales from June.

Tesla lowered the starting price of both models by 14,000 yuan ($1,935). The starting price of the Model Y Long Range is down 4.5% to 299,900 Yuan, and the starting price of the Model Y Performance is now down 3.8% to 349,900 Yuan.

In the same announcement, Tesla also said it will offer 8,000 yuan in insurance subsidies in China from August 14 to September 30 for buyers of entry-level, rear-wheel-drive versions of Model 3 vehicles in inventory.

Evercore ISI analyst Chris McNally said in a research note that he expects similar selective price cuts in the U.S. and Europe, which could lead to 100 basis points of continued pressure on Tesla’s third-quarter margins.

Masked visitors test drive a China-made Tesla Model Y sport utility vehicle (SUV) at the electric vehicle maker’s showroom in Beijing, China, Jan. 5, 2021. REUTERS/Tingshu Wang//File Photo

Shares of the company fell 2.7% to a two-month low of $236.15 in early trading.

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Tesla’s price cuts last month followed cash discounts that came despite pledges by other companies in China to avoid “unusual pricing,” which some thought signaled an end to price wars that threaten the industry’s profitability.

Last month Tesla CEO Elon Musk said further price cuts were possible, even after squeezing the automaker’s margins.

“Tesla is expected to start deliveries of the updated Model 3 in China (Project Highland) soon, and we suspect there may be some price cuts for the outgoing version as well,” Deutsche Bank analysts said.

Tesla has cut prices several times in the U.S., China and other markets since late last year, and made other concessions to reduce inventory, trying to protect itself against competition and economic uncertainty.

($1 = 7.2367 yuan)

Reporting by Shanghai Newsroom and Liz Lee; Additional reporting by Samrita Arunachalam and Akash Sriram in Bengaluru and Hyunjoo Jin in San Francisco; Editing by Christian Schmollinger, Tom Hogue, Sharon Singleton and John Harvey

Our Standards: Thomson Reuters Trust Principles.

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