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May 1, 2020

Tesla cuts prices in China to qualify for subsidies

Tesla is to cut the entry price for its Shanghai built Model 3 by 10% to ensure it qualifies for subsidies in the world's largest car market.

By Sam Duke

Tesla is to cut the entry price for its Shanghai built Model 3 by 10% to ensure it qualifies for subsidies in the world’s largest car market.

Tesla was facing a substantial headwind in its plans to grow its sales in the crucial China market. In a move designed to favour indigenous manufacturers, China’s finance ministry recently decided to limit the availability of subsidies to vehicles costing less than CNY300,000 (US$42,357).

This placed Tesla’s Model 3 – its volume model and the basis of its strategy to grow sales in China – outside of the group as it was priced at CNY325,000. The price cut brings its price under the threshold.

“Tesla has demonstrated its agility – and perhaps its industry leading margins – by announcing this 10% price cut,” said GlobalData analyst Calum MacRae.  

Tesla’s Standard Range Plus Model 3 will now cost CNY271,550 after the application of a CNY20,250 subsidy.

“It’s the second such price cut to the Model 3 in a matter of months with Tesla lopping 16% off the price of the car in early January,” notes MacRae. “The latest move means that Tesla can now expect to maintain its impressive growth in the China market. This growth saw Model 3 demand soar by 450% in March when it sold over 11,000 Model 3s.”

The Model 3 leads EV sales in China so far this year, with over 16,500 sold which is nearly double the volume of its nearest rival the BYD Qin.

“Tesla has demonstrated agility in a market that is crucial to its future success,” adds MacRae.

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