"Another Price Cut" Tesla Lowers Prices Again... Chinese Electric Vehicle Stocks Plunge

Tesla has once again cut prices in its key market, China. As concerns grow that the price-cutting competition ignited by Tesla will escalate into a bloody battle rather than market expansion, the stock prices of Chinese electric vehicle companies have plummeted simultaneously.

According to Bloomberg and other sources, Tesla announced on the 14th via Weibo that it would reduce the price of the higher trim of the 'Model Y' in China by 14,000 yuan (about 2.56 million KRW). Accordingly, the price of the Model Y Long Range dropped from 313,900 yuan to 299,900 yuan, and the Model Y Performance fell from 363,900 yuan to 349,900 yuan. In addition, the subsidy benefits through affiliated insurers for the rear-wheel-drive version of the 'Model 3' will be extended until the end of next month.

[Image source=Reuters Yonhap News]

Tesla lowered prices to expand sales in China. According to the China Passenger Car Association (CPCA), Tesla's sales volume in China in July decreased by 31% compared to the previous month. This marks the first time Tesla's sales volume in China has turned downward since December last year.

There are speculations that Tesla's move will reignite the price-cutting competition in the electric vehicle market. On the surface, Tesla claims it is lowering prices to boost sales in China, but industry insiders and experts believe there is a hidden strategy to shake competitors through a price competition chicken game. With the entry of existing automakers and new electric vehicle startups into the market, Tesla's dominant position is inevitably weakening, so it has implemented a large-scale price cut to undermine the chasing capabilities of latecomers.

Tesla has implemented several price cuts this year in major markets worldwide, including the United States and Europe. Earlier this year, Tesla reduced prices by 6-20% per model in the U.S. market and announced price cuts of 10-15% in European markets such as Germany, France, and the United Kingdom. In China, Tesla cut prices of key models like the Model Y and Model 3 by 14-28%. Following Tesla's price cuts, Chinese competitors led by BYD joined the price-cutting movement, and some models from Ford and Volkswagen also followed suit.

It is expected that latecomer companies in China will also engage in the price-cutting competition. According to Bloomberg, more than 30 electric vehicle companies have joined the price competition following Tesla's existing price-cutting policy. However, unlike Tesla, which has overwhelming market share and cost structure, some startups face the risk of having to cease operations due to the backlash from large-scale price discounts. Considering high development and marketing costs and economies of scale, most startups that have yet to turn a profit find it difficult to compete in the price-cutting battle.

Following the news of Tesla's price cuts, the stock prices of Chinese electric vehicle companies plunged simultaneously. BYD, the largest Chinese electric vehicle company listed on the Hong Kong Stock Exchange, closed at 234 Hong Kong dollars, down 7.86%. The stock prices of Li Auto (Li Xiang) and XPeng also fell by 3.45% and 6.51%, respectively.