Tesla last week announced price cuts of up to 26% on its vehicles in China to help underpin its sales in the world's largest electric vehicle (EV) market, according to Chinese media.
The move followed last July's hike of customs duty on US vehicle imports from 15% to 40% in retaliation to similar import duty penalties imposed by the US on shipments from China.
Last week, Tesla cut the price of its Model S in China by 12%, and of its Model X by 26%, while the newly released Model 3 was repriced 14% below pre-order level.
In a statement to Chinese media, Tesla said: "We are absorbing a significant part of the tariff increase to help make our cars more affordable for customers in China."
Before the July tariff hikes, most Tesla models in China were at least 50% more expensive than the same models sold in the US. After the tariff hikes, the cars became prohibitively expensive there.
According to local reports, Tesla sold 2,147 cars in China between August and October 2018, 56% lower year on year, and less than 12,000 units in the first 10 months of 2018.
Last year, it sold just over 17,000 cars in the country.
Sales of new energy vehicles in China have jumped by close to 76% to 860,000 units so far this year, including an estimated 645,000 battery electrics.
Tesla plans to spend US$2bn in a new 500,000 unit car plant near Shanghai with the first phase expected to install initial capacity of 250,000 by 2022.
The new facility should help the company reduce prices significantly by avoiding import duty.