Customer is King. This notion appears to have become a new guiding principle for electric vehicle (EV) manufacturers. Otherwise, there would be no reason for them to reduce prices and trim their profit margins. If the idea of purchasing an EV just crossed your mind, forget it unless you live in China, where a full-fledged price war is underway. Even in this competitive scenario, Elon Musk finds himself entangled, making Tesla investors rather nervous.
Tesla has made a second price reduction within a week in China, announcing some major discounts for the Model Y and Model X. The initial prices of certain versions of these models have been reduced by 14,000 yuan (approximately $2,000) for Chinese buyers, representing a decrease of up to 6.9%. However, this competitive move failed to impress the investors and led to a decline in Tesla stock price by as much as 8%.
With these cuts, Elon Musk's electric vehicle company is simply aligning with the prevailing trend, which is not surprising. The Chinese EV market is “hack and slash.” Domestic Chinese automakers such as BYD, Nio, and Xpeng took bites out of Tesla's profit pie in the second quarter of 2023. And it's not just them – other notable EV manufacturers in China, including SAIC, MG Motor, and Great Wall Motor, all have significantly lowered prices across models this year. Such price slashing might impact the financial performance of EV manufacturers this quarter, but hey, who cares when it comes to luring customers, right?
China is vital to Tesla, with over half of its worldwide sales coming from deliveries out of its Shanghai Gigafactory alone. Most market players anticipate this trend to persist into the third quarter, with leading companies like Tesla and BYD adopting more aggressive strategies.
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