Tesla Shanghai Factory Said to Cut Output amid Signs of Easing Price War

TMTPost -- Tesla Inc. has to deal with consequences of ongoing price war that the U.S. electric vehicle (EV) giant has been intensifying these years as the growth of industry has slowed.

Credit：Tesla

Tesla has instructed employees at Gigafactory Shanghai to cut production of both the Model 3 and Model Y by working five days a week, rather than the usual six and a half days, Bloomberg cited people with knowledge of the matter on Friday. According to the sources, output of Shanghai factory has been trimmed since the instruction was made earlier this month, and local employees have not received clear indication of when the plant will go back to full capacity.

Tesla didn’t respond to the report. Shares of the EV maker dropped as much as around 3.8% before paring most of losses and settled 1.2% lower Friday. The reported production cut suggested how difficulty Tesla had in sales in China, the largest EV market across the world as well the most competitive one.

Tesla initiated the year 2024 with a new round of price cuts in China, cutting prices even on its recently updated version of Model 3 sedan. It lowered prices on all the variants of new model 3 and two versions of Model Y on January 12. The Model 3 Rear-Wheel Drive (RWD) now costs RMB245,900 (US$34,620), representing a reduction of RMB15,000, or around 6%. Price of the Model 3 Dual Motor All-Wheel Drive version (AWD) dropped RMB11,500 to RMB285,900. Model Y RWD version was cut by RMB7,500 to RMB258,900, and the long range version was reduced by RMB6,500 to RMB299,000. In the meantime, Tesla China discontinued the insurance subsidy it offered for Model 3 and no longer offered the auto loan with the low rate of 1.99%.

Tesla’s Chinese rivals soon followed suit. China’s manufacturer BYD Co. Ltd escalated the price war with new launch new models directly vying with gas-powered vehicles for the affordable auto segment.BYD unveiled two versions of the Qin Plus Honor Edition starting at RMB798,000. As the plug-in hybrid electric vehicle (PHEV), the DM-i version of the Qin Plus Honor Edition has five variants with a price range between RMB798,000 to RMB125,800. The full-electric version, or EV version, also has five variants, priced between RMB109,800 and RMB139,800. Compared with previous edition, the starting price of the latest Qin Plus Honor Edition is RMB20,000 cheaper.And the new edition not only shares all the features with the previous version but has two new features. In terms of starting price, the new edition first brought DM-i version costs less than RMB80,000 and the EV version first competes with vehicles at the price tag under RMB100,000.

The price competition extended into this month. Nine auto companies, including Tesla, BYD, Zhejiang Geely Holding Group Co., Ltd., SAIC Volkswagen Automotive Co., Ltd., Rising Auto, an EV brand under SAIC Motor, Chery Automobile Co. Ltd., IM Motors, an EV joint venture between SAIC Motor and Chinese technology companies Zhangjiang Hi-Tech and Alibaba Group, Hyundai Motor Company and Chang'an Automobile Co., Ltd., announced new promotional policies or price cuts on March 1. Tesla that day offered customers placing orders for a RWD version of Model 3 or Model Y that are in stock for delivery by the end of March an insurance subsidy of as much as RMB8,000. The insurance subsidy, along with discounts of RMB2,000 on some optional paint colors and the preferential financing plans, effectively reduced the starting price of a vehicle by almost RMB35,000.

Earlier this week, Tesla confirmed it would raise price for Model Y made in China by RMB5,000 from April 1, a sign that the company began to reverse some of efforts earlier. Considering the insurance subsidy for Model Y will expire on March 31, the price adjustment actually represents an up to RMB23,000 of increase, an official at Tesla China told National Business Daily, a Chinese national financial and economic daily newspaper. Prior to the move, Tesla had announced last week the price increase for all Model Y cars in the United States by US$1,000 on April 1, and a hike or about 2,000 euros for the same model in a number of European countries on March 22.