(Bloomberg) — Tesla Inc. cut prices again in China, sending auto stocks tumbling on concerns the move will rekindle an international price war that had shown signs of abating.
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The automaker marked down the Long Range and Performance versions of the Model Y sport utility vehicle by 14,000 yuan ($1,900) to 299,900 yuan and 349,900 yuan, according to a post on its Weibo account. Tesla also extended an 8,000-yuan insurance subsidy for the base version of the Model 3 sedan, keeping the perk in place through the end of next month.
The reductions — amounting to about 4.5% and 3.8% for the two Model Y versions, respectively — may presage “similar select cuts” in the US and Europe soon, Chris McNally, an analyst with Evercore ISI, said in a note. That would pressure the company’s third-quarter profit margin, he added.
Tesla’s actions follow moves by Geely Automobile Holdings Ltd.’s Zeekr brand, which lowered prices by as much as 37,000 yuan last week, as well as Zhejiang Leapmotor Technologies Ltd., which discounted by as much as 20,000 yuan at the beginning of the month. Tesla started the price war with an initial round of cuts beginning late last year that have made some of its models almost 50% cheaper than in the US and Europe.
Tesla’s stock fell 2.4% as of 8:13 a.m. in early New York trading, while China’s best-selling automaker, BYD Co., sank 6.2% in Hong Kong. Li Auto Inc., Xpeng Inc. and Leapmotor shares all slumped. In the US, Rivian Automotive Inc. and Lucid Group Inc. also declined in premarket trading.
“Price competition has been and will remain an ongoing theme in China’s auto market,” said Joanna Chen, an auto analyst at Bloomberg Intelligence. “Tesla is trying to keep volume rolling after July sales showed its slowing order intake without new models to attract Chinese buyers.”
Tesla’s shipments from its China plant plunged 31% in July to the lowest level this year. The automaker announced last month that global production would drop in the third quarter due to downtime for factory upgrades, without offering specifics. It’s expected to start making a revamped version of the Model 3 sedan soon.
While plug-in vehicle deliveries in China slipped in July from June, BYD, Li Auto and Nio Inc. all set new records for shipments.
Tesla Chief Executive Officer Elon Musk warned last month that the carmaker would have to keep cutting prices if interest rates continued to rise. Several rounds of discounting already have taken a toll on the company’s automotive gross profit margin, which fell to a four-year low in the second quarter.
A group of automakers including Tesla and BYD pledged early last month to maintain fair competition and avoid “abnormal pricing” in China, only to retract the agreement days later due to antitrust concerns.
–With assistance from Chunying Zhang, Charlotte Yang and Craig Trudell.
(Updates with analyst comment in the third paragraph.)
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