BEIJING, Aug 14 (Reuters) – Tesla ( TSLA.O ) on Monday cut prices for its Model Y long-range and performance versions in China from Aug. 14, sending its shares lower on concerns of pressure on it. Profit margins.
The electric car company lowered the starting price of both models by 14,000 yuan ($1,934.58). The starting price of the Model Y Long Range is down 4.5% to 299,900 Yuan, and the starting price of the Model Y Performance is now down 3.8% to 349,900 Yuan.
In the same announcement, Tesla also said it will offer 8,000 yuan in insurance subsidies in China from August 14 to September 30 for buyers of entry-level, rear-wheel drive versions of Model 3 vehicles in inventory.
Tesla’s price cut follows similar moves last month, which came despite a pledge with several companies in China to avoid “abnormal pricing,” signaling a truce in price wars that threaten the industry’s profitability.
Evercore ISI analyst Chris McNally said in a research note that he expects similar selective price cuts in the U.S. and Europe, leading to continued pressure of 100 basis points on Tesla’s third-quarter margins.
Masked visitors test drive a China-made Tesla Model Y sport utility vehicle (SUV) at the electric vehicle maker’s showroom in Beijing, China, Jan. 5, 2021. REUTERS/Tingshu Wang//File Photo
Shares of the company fell 2.7% in early trading to a more than two-month low of $236.15.
Last month, Tesla CEO Elon Musk said further price cuts were possible, even as it squeezed the automaker’s margins.
“Tesla is expected to start deliveries of the updated Model 3 in China (Project Highland) soon, and we suspect there may be some price cuts for the outgoing version as well,” Deutsche Bank analysts said.
Tesla has repeatedly cut prices in the U.S., China and other markets since late last year, and made other concessions to reduce inventory, trying to protect itself against competition and economic uncertainty.
Sales of Tesla’s China-made vehicles fell 31% in July from June, data from the China Passenger Car Association (CPCA) showed earlier this month, marking the first monthly decline since December.
($1 = 7.2367 yuan)
Reporting by Shanghai Newsroom and Liz Lee; Additional reporting by Samrita Arunachalam and Akash Sriram in Bangalore; Editing: Christian Schmollinger, Tom Hogue and Sharon Singleton
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