Signs of a Domino Effect in China Electric Vehicle Price Cuts

Tesla Price Cut Followed by Huawei Joint Venture Electric Vehicle Price Reduction
Uncertain Whether Electric Vehicle Price Cut Policy Will Spread to Other Countries

[Asia Economy Senior Reporter Cho Young-shin] Chinese electric vehicle manufacturer Seres has reduced the selling price of its electric cars. This move appears to be a response to Tesla's price cuts for electric vehicles in China. As competition among companies intensifies, the prevailing view is that a domino effect of price reductions will occur.

Photo by Aito, captured from M5 homepage

According to Chinese media such as Pengpai on the 26th, Seres lowered the prices of its pure electric vehicles, the Aito M5 and M7 models, by 8,000 yuan (approximately 1.56 million KRW) each. Aito is an electric vehicle brand jointly created by Chinese Huawei and Seres, an electric vehicle company under Chongqing Sokon (Seres) Automobile.

Seres, which launched its first electric vehicle in March, is a new player in the electric vehicle sector, having sold 10,100 electric vehicles last month and a total of 27,400 units in the third quarter alone.

Chinese media reported that following Tesla's announcement of price cuts, domestic Chinese brands have also implemented price reductions, and it is expected that electric vehicle manufacturers will compete to lower prices.

Tesla China announced on the 24th (local time) that it would reduce the selling price of the Tesla Model 3 in China by 5% to 265,900 yuan. This is the first time Tesla China has lowered its selling prices in China this year.

Additionally, the price of the Model Y, a sport utility vehicle (SUV), was announced to be reduced by 8.8% to 288,900 yuan. Due to the price cut, the Model Y now qualifies for an electric vehicle subsidy of 10,000 yuan. From the consumer's perspective, the total discount amounts to 38,000 yuan (7.41 million KRW), combining the price reduction of 28,000 yuan and the subsidy of 10,000 yuan. Exemption from acquisition tax is an added benefit.

Among the 318,000 vehicles Tesla sold up to September this year, 219,100 were Model Ys, making it a popular model. It is the best-selling luxury SUV (priced above 300,000 yuan) in China.

China Dongwu Securities analyzed that following Tesla's price cuts, competitors such as BYD, Geely Automobile, and Changan Automobile have no choice but to implement price reduction policies. They also added that Tesla, with its production scale, technological innovation, and supply chain advantages, may further reduce prices.

Chinese authorities are quietly welcoming the price reduction policies of electric vehicle manufacturers. Electric vehicles not only drive domestic demand but also increase the proportion of new energy vehicle sales relative to new car sales. According to the "2021?2035 New Energy Industry Development Plan" by China's Ministry of Industry and Information Technology, the goal is to raise the penetration rate of new energy vehicles to 25% by 2025, 40% by 2030, and 50% by 2035. It is optimistic that China’s electric vehicle sales will exceed 5 million units this year. The prevailing view is that the 2025 target of 25% will be achieved three years ahead of schedule.

Price reductions in electric vehicles also benefit domestic consumption. Retail sales in China in September grew by only 2.5% year-on-year, falling short of the expected 3.3%. The 2.5% growth was driven mainly by automobiles, especially electric vehicles. Chinese media forecast that electric vehicle price cuts will help China’s domestic economy in the fourth quarter. However, it remains uncertain whether the price reductions originating in China will spread to other countries. Unlike the expanding and highly competitive Chinese electric vehicle market, demand for electric vehicles in other countries is not explosively increasing due to factors such as economic recession.

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