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| Tesla lowers sales price in China, highlighting intensified competition in Chinese market |
Tesla cut the prices of its cars in China on Monday, a sign of increased competition in the world's largest auto market, sending the company's shares tumbling.
Prices for the Model 3 sedan on Tesla 's China website on Monday were set to start at 265,900 yuan ($36,600), including government subsidies, a 5 percent drop. The advertised price of the Model Y sports utility vehicle was 288,900 yuan, a 9% drop.
Tesla shares fell more than 6 percent before recovering slightly, as the price cut fueled investor concern that the company's profitability and dominance in the electric vehicle market is threatened by slowing economic growth and increased competition. Until recently, strong demand for Tesla vehicles allowed the company to raise prices frequently.
In China, Tesla faces competition from domestic companies such as BYD, SAIC Motor and Nio, which are also entering the European market with cheaper electric vehicles. The Chinese government has been promoting its own electric car and battery makers, viewing the shift in technology as an opportunity to break into the global market and challenge established automakers from Japan, Germany, South Korea and the United States.
Although China has the world's largest auto market, Chinese automakers have a small share of the rest of the world. Investors are closely watching Tesla's performance in China, where growth potential is seen to be far greater than in Europe or the United States.
Tesla shares have fallen 12 percent since the company disappointed Wall Street on Wednesday with third-quarter profit figures. While the company reported third-quarter earnings that doubled from a year earlier to $3.3 billion, it fell short of investor expectations.
Investors were concerned after Tesla had problems ramping up production at its new factories in Austin, Texas, and near Berlin. "It will take time to ramp up production at factories," Tesla told investors last week .
Tesla shares were also under pressure as traders widely expected that Chief Executive Elon Musk would have to sell more shares to raise the funds needed to complete the acquisition of Twitter by Friday .
Tesla's price cuts in China could be good news for car buyers. Popular electric models like the Ford Mach-E, Hyundai Ionic 5 or Volkswagen ID.4 are hard to come by, with reports of dealers offering thousands of dollars more than the manufacturer's suggested retail price.
Automakers are producing more vehicles because they have fewer supply chain problems, while higher interest rates have led to sharply higher monthly car payments, reducing demand, which could shift the market.
Tesla's wait times are already shrinking, in part because the company has been able to ramp up output at its Shanghai factory, which has been hit by the coronavirus lockdown that has slowed production.
Tesla's Chinese website tells buyers who are ready to buy a car that they can receive the Model Y in as little as a week. The U.S. website told buyers they could receive the Model 3 as early as this month. Previously, Tesla buyers had to wait months.
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