Tesla’s entry into China’s car market has been a game-changer, with its innovative electric vehicles capturing the attention of the Chinese consumer. However, what is now grabbing headlines is the price war that Tesla has triggered in China. The price war is reshaping the world’s biggest car market, and in this article, we will explore how Tesla’s discounts on electric vehicles in China set off this price war.
In October 2020, Tesla made its first move in the price war by cutting prices on models produced at its factory near Shanghai. This move put the pressure on its competitors, who found themselves unable to compete on price. Tesla went a step further in January 2021, slashing prices again and making its locally-made cars up to 14% cheaper than the previous year. This move not only cemented Tesla’s position as a major player in China’s hyper-competitive car market but also forced its competitors to follow suit.
Local upstarts such as Xpeng Inc. and Nio Inc. were among those who were forced to cut their prices to remain competitive. Leading international brands, including Volkswagen AG and Mercedes-Benz Group AG, also offered discounts of up to 70,000 yuan ($10,000) to keep pace with Tesla’s price cuts. Ford Motor Co.’s Mach-E electric sport utility vehicle was also impacted, with its starting price reduced by a third.
This price war has not only resulted in discounts for consumers but has also made the Chinese car market more competitive. It has put pressure on car manufacturers to improve their production processes and offer more value for money to consumers. The market has become more dynamic, with new players entering the market and existing players innovating to remain relevant.