Tesla starts China price war

Pushing sales: Visitors check a China-made Tesla SUV in Beijing. Elon Musk’s EV maker – a major player in hyper-competitive China – has cut prices on models produced at its enormous factory on the outskirts of Shanghai. — Reuters

BEIJING: Tesla Inc triggered a price war in China that’s poised to reshape the world’s biggest car market, with hefty discounts threatening to drive some automakers out of business.

It started in October. Elon Musk’s electric vehicle (EV) maker – a major player in hyper-competitive China – cut prices on models produced at its enormous factory on the outskirts of Shanghai.

Matters escalated in January, with another discount that left Tesla’s locally-made cars up to 14% cheaper than last year, and in some cases almost 50% less expensive than in the United States and Europe.

The moves left rivals with little option but to follow suit. Among them were local upstarts such as Xpeng Inc and Nio Inc as well as leading international brands like Volkswagen AG and Mercedes-Benz Group AG, which offered discounts of up to 70,000 yuan (RM45,360).

Ford Motor Co’s Mach-E electric sport-utility vehicle is down to a starting price of 209,900 yuan (RM136,036), about a third cheaper than in the United States.

“Tesla created havoc for the rest of the market,” said Jochen Siebert, managing director of JSC Automotive, a consultancy with offices in Shanghai and Stuttgart.

At least 30 more carmakers have cut prices, according to calculations by Bloomberg News and local media.

The China Association of Automobile Manufacturers called for an end to the price war on Wednesday, saying that it wasn’t a long-term solution to a slowdown in sales and accumulation of inventory, and that the industry should “return to normal operation” to ensure its healthy development.

Commentaries in state media earlier this week also said it was improper for regional governments to offer subsidies on vehicles produced locally. In one example, Hubei province and state-backed Dongfeng Motor Group Co lowered prices by as much as 90,000 yuan (RM58,330) – or almost 40% – on Citroen C6 models.

The cuts have come after a difficult time for China’s auto sector. Consumer spending was badly dented by long-running Covid restrictions, while sales have also been impacted by the removal of state subsidies on EV purchases at the end of last year. Supply-chain disruptions have hurt industries globally too.

Even with those challenges and an economic slowdown, retail sales of new energy vehicles – including fully electric and plug-in hybrids – almost doubled to 5.67 million last year. BYD Co accounted for around 30% of those. Tesla shipped a monthly record of over 100,000 EVs from Shanghai in November.

With the increasing adoption of EVs, China’s auto market is going through a “a very profound reshuffle,” Nio chief financial officer Steven Feng said in an interview with Bloomberg Television on Wednesday.

“We need to go through this price war at the beginning of the year, and then we expect the industry to go through some profound fundamental consolidation,” he said. “It’s almost a consensus that China now has too many automakers.”

Customers are becoming more selective and demand is strong, Feng said, adding that Nio is confident of meeting its target of a quarter-million EV sales this year, more than double its 2022 total. Tesla’s head of production Tom Zhu has said the company’s price cuts “generated huge demand.”

According to Bloomberg New Energy Finance, EV sales could reach 8.1 million units in China this year, compared with 3.2 million in Europe and 1.9 million estimated for the United States.

There are few signs of a let up in competition, with 155 new pure electric and plug-in hybrid models expected to be unveiled in China this year alone, according to Sanford C. Bernstein & Co. That means more price reductions could come from the financially stronger bigger players.

Tesla has “several billion dollars that they can use for this purpose while others don’t,” JSC Automotive’s Siebert said. — Bloomberg

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China , Tesla , Musk , pricewar , discounts , EVs , inventories , sales , slowdown


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