Tesla's China price cut raises questions about EV demand
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Tesla is cutting the prices of its electric vehicles in China in the face of increased competition and the country's economic slowdown.
Why it matters: Tesla's presence in China is crucial to its financial health and hence to its development of future EVs and related technologies.
The big picture: "China’s the biggest EV market in the world, and you could argue that it’s the most competitive because it’s got the most players, including homegrown companies like BYD giving Tesla a real run for their money," Autotrader analyst Michelle Krebs tells Axios.
- The automaker cut starting prices for its vehicles in China by anywhere from 5% to 9%, according to multiple reports.
- US Tiger Securities analyst Bo Pei attributed the move to "overall soft auto demand in China" and "competition" with BYD, while CMBI analyst Shi Ji said it raises the prospect of a "price war."
What we're watching: Whether Tesla is at risk of losing its global leadership post in the EV space to the likes of Chinese EV maker BYD — or if this is simply a minor bump on the road to continued dominance.
The intrigue: EV prices had been rising, not falling, as automakers have struggled to keep up with demand.
- Tesla CEO Elon Musk has repeatedly insisted that the company has no challenges with demand.
- "I can't emphasize enough — we have excellent demand for Q4, and we expect to sell every car that we make for as far in the future as we can see," he told investors on a conference call last week.
The impact: Investors punished the stocks of other Chinese EV companies on Monday, sending shares of NIO, XPeng and Li Auto down by double-digits.
- Even BYD was down by nearly 9% in afternoon trading as traders reacted to the Tesla reports and news of China President Xi Jinping consolidating power as he locked up a third term.
Keep in mind: Established global automakers like General Motors, Ford, Hyundai, Kia, Nissan and Volkswagen are investing heavily in electric vehicles, aiming to take market share away from Tesla throughout the world.
- "We’ve anticipated all along that as more and more competitors come on board, Tesla will be challenged," Krebs says.
The impact: Tesla shares fell 6.9% Monday morning before recovering to close down 1.5%.
(Disclosure: Autotrader is owned by Cox Enterprises, which owns Axios.)
