Tesla Slashes Prices in Major Markets Amid Rising Competition and Sales Slump

Tesla has announced significant price reductions in China and Germany following similar cuts in the United States, as the world’s largest electric vehicle manufacturer grapples with declining sales and escalating competition in key markets.

The recent round of price reductions adds to a series of cuts that Tesla initiated early last year, aimed at sustaining demand amidst intensifying competition from traditional automakers and higher interest rates that increase the cost of vehicles for many consumers. These price cuts have squeezed Tesla’s profit margins, resulting in a roughly 4% drop in its stock price during Monday’s trading session ahead of its first-quarter earnings report due on Tuesday.

On Sunday, Tesla reduced the base prices of four models sold in mainland China—its largest foreign market—by 14,000 yuan ($1,932). The Model Y, the company’s top-selling vehicle in the country, now starts at a base price of 249,900 yuan ($34,502), the lowest since its launch.

In Germany, Tesla’s largest European market, the rear-wheel-drive Model 3 saw a price reduction of about 2,000 euros ($2,132) to a new price of 40,990 euros ($43,707), according to the company’s official website.

The initial price reductions were unveiled this Friday in the U.S., where Tesla lowered the prices of three out of its five models. The Model Y, Model X, and Model S each saw a price drop of $2,000, while the prices for the Model 3 and Cybertruck remained unchanged.

This flurry of reductions comes at a challenging time for Tesla. Its stock has plummeted more than 40% since the start of the year following a report of a drop in quarterly deliveries for the first time in nearly four years and an announcement of job cuts affecting more than 10% of its global workforce.

On Saturday, Tesla CEO Elon Musk stated that he had postponed his planned trip to India due to “very important” company obligations. He was expected to arrive in the country this week for a visit that was anticipated to include a meeting with Prime Minister Narendra Modi and to confirm that Tesla would build a factory in the world’s most populous country.

Increasing Tensions in China’s EV Market

In China, the largest electric vehicle market globally, Tesla’s price reduction is expected to intensify the ongoing market competition, which is already highly competitive.

This Monday, Chinese electric vehicle manufacturer Li Auto, led by billionaire entrepreneur Li Xiang, responded to Tesla’s move by announcing immediate price reductions for its four models. Its Li Mega, which it claims is the largest passenger electric vehicle in the world, is now 30,000 yuan ($4,142) cheaper.

The American company was already facing stiff competition in China.

Tesla was narrowly outpaced by Chinese firm BYD, which became the top-selling electric vehicle brand worldwide in the last quarter of the previous year. Compared to Tesla, BYD’s vehicles are more affordable. Their entry-level model sells in China for just under $10,000. In contrast, Tesla’s cheapest model, the Model 3, now costs 231,900 yuan ($32,017) in China after Sunday’s price cut, still nearly three times more than BYD’s equivalent.

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