Tesla, Price Cut Rumors... Will the Supplier-Dominant Market Change?

Chinese Media "Tesla Model Y to Cut Price by 8 Million KRW"
China Electric Vehicle Market, Global Battleground... Fierce Competition
Tesla Shanghai Factory Production Up... Outlook Gloomy
Over 2 Years of Manufacturer Dominance, Signs of Change

An employee is talking in front of a Tesla vehicle displayed at an event held in Beijing, China.

[Asia Economy Reporter Choi Dae-yeol] Electric vehicle maker Tesla is reportedly planning to lower the selling price of its main models in China. China is considered the world's largest market, where not only global automakers but also local brands are continuously developing electric vehicles.

Tesla has maintained a pricing policy quite different from traditional automakers, frequently raising prices in major markets worldwide. In South Korea, Tesla has lowered prices to meet the upper limit of electric vehicle purchase subsidies, but over the past 2 to 3 years, prices for major models have increased by millions to tens of millions of Korean won. As the supply of automotive semiconductors gradually improves and manufacturers recover production volumes, combined with a recession and interest rate hikes weakening car purchasing power, attention is focused on whether the supplier-favored market will change in the future.

According to a report on the 3rd by Chinese local media Huxiu.com, Tesla is said to have decided to reduce the price of the Model Y produced at its Shanghai factory by up to 40,000 yuan (about 8 million KRW). The Model Y is an electric sport utility vehicle (SUV) and, along with the brand's entry-level sedan Model 3, is considered a main model of the local factory.

Model 3 manufactured at Tesla factory in Shanghai, China

The locally produced Model Y has seen several price increases in China and currently starts at 316,900 yuan (about 64 million KRW) for the base model. The media outlet predicted that the base rear-wheel-drive Model Y would be priced around 270,000 to 290,000 yuan (about 55 million to 59 million KRW). Tesla reportedly denied this report.

The Model Y, along with the Model 3, has significantly contributed to Tesla's rise as the world's largest electric vehicle maker. It is also very popular in China. More than 170,000 units were sold from January to August this year, nearly tripling the sales volume compared to the same period last year (59,900 units). Including internal combustion engine vehicles, it surpasses German brands such as Mercedes-Benz, BMW, and Audi in the same class and is considered the best-selling high-end SUV locally.

Tesla's Shanghai factory has grown significantly in recent years. Besides its headquarters in the United States (Fremont, etc.), the company has factories in China and Germany, pursuing a strategy of serving local markets and exporting to neighboring countries. The Shanghai plant is reportedly planning to increase production capacity to 1.1 to 1.2 million units annually in the mid to long term. Considering that a typical automobile factory produces around 300,000 units per year, this is a considerable scale.

The Hongqi E-HS9 electric vehicle from China FAW is exhibited at an event held in Beijing.

The problem is that despite the improved supply of automotive semiconductors, which had been the main cause of production disruptions, the market outlook remains bleak. It is highly likely that the producer- and supplier-favored situation that lasted nearly three years after COVID-19 will change. Until now, due to parts shortages causing production delays, customers had to wait months or even years after ordering.

Recently, concerns about a recession have spread, and countries have raised benchmark interest rates, making conditions worse for consumers to purchase new cars. If wallets close faster, high-priced goods like automobiles are bound to be hit hard.

Although Tesla denied rumors of price cuts, movements to prepare for future market conditions have been spotted in various places. According to local media reports, in mid to late last month, Tesla stores in China offered 8,000 yuan (about 1.6 million KRW) as a subsidy for insurance enrollment. Considering that just a few months ago, orders surged and prices were raised consecutively, this indicates a significant shift in the trend.

When buying a Tesla in China, the waiting period is reportedly about 1 to 4 weeks, significantly shorter than in the past. A few months ago, Tesla CEO Elon Musk responded on Twitter to a reporter's question, "If supply chain issues are resolved, are you willing to lower prices?" by saying, "We can lower prices."

The Tesla Model 3 was exhibited at the China International Fair for Trade in Services held on the 1st of last month.

This content was produced with the assistance of AI translation services.