SHANGHAI: Tesla Inc is considering cutting the price of its China-built Model 3 sedans by 20% or more next year, people familiar with the plans said, betting the move will lure buyers as the world’s biggest electric-vehicle (EV) market slows.
Tesla aimed to bring down costs by using more local components, allowing it to import fewer parts and avoid tariffs, the people said, asking not to be identified as the matter isn’t public.
Prices of the cars, which would be built in Tesla’s new Shanghai factory and start at 355,800 yuan (US$50,800), would probably be lowered from the second half of 2020, they said.
Chief executive officer Elon Musk is counting on the multibillion-dollar Shanghai plant, Tesla’s first factory outside the US, to give it an edge over the likes of BMW AG and Daimler AG, which are also targeting China with new EV models.
The move would also pressure local incumbents such as NIO Inc and Xpeng Motors to follow suit with price cuts.
Competition is heating up as EV makers struggle through an unprecedented slump. Sales of electric cars have fallen for months in China after the government scaled back subsidies.
The scale of the price cuts and the timing could change depending on market situations, the people said. A Tesla representative in China declined to comment.
Much of the cost cuts will hinge on batteries, which are typically the most expensive part of an electric car.
Tesla currently relies entirely on Japan’s Panasonic Corp for batteries but that’s changing as it agreed to buy batteries from an LG Chem Ltd factory that’s about 320km northwest of Shanghai, people familiar said in August.
Tesla also struck a pact to use batteries from China’s Contemporary Amperex Technology Co Ltd by as early as next year, people familiar said last month.
Meanwhile, Tesla has been making final preparations to begin deliveries from its Shanghai plant.
This month, Chinese authorities disclosed that the locally built Model 3 will qualify for state subsidies of as high as 24,750 yuan per car, though it’s unclear how much of that rebate would go directly to customers. — Bloomberg
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