Tesla, Inc. TSLA cuts the prices of its Giga Shanghai-made cars by about 5%, reversing price increases announced earlier this year.
What happened: The base price of the Chinese-made Model 3 is listed as 265,900 yuan ($36,663) on Tesla’s China website as of Monday. This marks a decrease from the previously listed price of 279,900 yuan.
The starting price of the Model Y SUV will be reduced from 316,900 yuan to 288,900 yuan.
Tesla factory in China has encountered disruptions twice this year. The resurgence of COVID-19 forced a nearly month-long shutdown, particularly in April. Subsequently, the factory was closed in July for modernization.
Sales of Chinese-made vehicles rebounded sharply in August and September after Giga Shanghai reopened after the disruptions.
See also: How to invest in Tesla shares
Why it matters: The price cuts reflect deepening rivalry in China as domestic startups such as BYD Co.Ltd. BYDDY BYDDF and Nio, Inc. NEVER ramp up production and expand their product range. Tesla could gain volume by offering its vehicles at competitive prices.
Now that the Model Y Standard Range is priced below the 300,000 yuan mark, vehicle buyers can get an additional grant of 12,000 yuan, according to Future Fund’s Gary Black. The fund manager expects this move to help boost volumes in China.
On the other hand, reduced prices could reduce the average selling price and thus the margins. Tesla recently reported a loss of revenue for the third quarter, which analysts have credited Top-line softness at relatively cheaper prices for its China-made vehicles.
Price promotion: Tesla closed Friday’s session up 3.45% at $214.44 Benzinga Pro data.
