Tesla’s Price Cuts Shake Up Chinese EV Market, Rival Brands Feel the Heat

Tesla’s biggest rivals may not be in the US, but in China, according to CEO Elon Musk’s recent reference to “Some company out of China” during Tesla’s Q4 2022 earnings call. China has a thriving EV market with successful local brands like Li Auto, Nio, and Xpeng who are being impacted by Tesla’s price cuts in the country.

Despite Musk’s previous statements about gas-powered cars being Tesla’s top rivals globally, in China, the US automaker is primarily focused on outperforming local EV brands.

Tesla recently made major price cuts in various global markets, including the US and China, which are affecting the automotive industry as a whole. Despite being considered a smaller automaker, Tesla’s Model Y and Model 3 rose to the top of the best-selling car list in 2022 due to high prices.

To boost sales in China, Tesla offered incentives at the end of 2022 and 2023, causing a surge in orders and deliveries, but also sparked protests from some customers who felt cheated by the price cuts and demanded refunds, which Tesla declined to honor.

According to a report by Teslarati, Li Auto, Nio, and Xpeng all saw a significant decrease in their monthly and annual sales in January 2023 compared to January 2022. Despite a general expectation for reduced car sales in January compared to December, these electric vehicle manufacturers were likely anticipating a sales boost. An analyst based in China, Gao Shen, commented on the situation.

“Apparently, Tesla’s huge discounts [on its Model 3 and Model Y vehicles] siphoned off drivers’ buying interest in the Chinese-developed smart EVs. Overall demand for expensive EVs appears to be weak, which could lead to price wars in the premium EV segment this year.”

In January 2023, Li Auto saw a decrease in sales by 23% YoY, totaling around 15,000 vehicles sold. NIO, on the other hand, sold approximately 8,500 electric vehicles, a 12% decrease from January 2022 and 46% drop from December 2022. The biggest decline was experienced by Xpeng, with a 60% decrease in sales compared to January 2022.

In contrast, after Tesla’s recent price cuts in China, the company experienced a significant surge in sales. The most notable cut, a 13.5% reduction, led to a 76% increase in sales according to China’s Merchant Bank. In just one week, Tesla was able to sell over 12,000 units.

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