Tesla's Price Reductions Making Major Impact On Rivals In China

Elon Musk mentioned a Chinese rival as the US EV maker's primary competitor, and it seems Tesla's price cuts are doing their job.

Tesla Model Y (MIC) (source: Tesla Greater China)

Steven Loveday

By: Steven Loveday

Feb 1, 2023 at 12:56pm ET

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Tesla's top rivals may not be in the US, but rather, in China. In fact, CEO Elon Musk made a reference to "Some company out of China" during Tesla's recent Q4 2022 earnings call when talking about the US EV maker's biggest rival. Recent reports suggest that Tesla's price cuts in the country are impacting the sales of local EV brands, including Li Auto, Nio, and Xpeng.

Musk has talked about Tesla's top rivals in the past being gas-powered cars, not EVs. However, China has the biggest automotive market in the world, with many successful companies producing and selling EVs. That said, perhaps Tesla's biggest competitors on a global scale are gas cars, but in China, it's locally produced EVs that the US brand is primarily focused on beating in sales.

Tesla recently cut prices rather significantly in the US and China, among other global markets. As we previously reported, the major price reductions seem to be impacting the global automotive market as a whole, which comes as no surprise. Tesla – which many still consider a smaller, niche automaker – moved the Model Y and Model 3 way up the list of the top-selling cars in the world in 2022, and most of those sales happened when Tesla's prices were historically high.

Tesla offered multiple incentives in China at the end of 2022 and more in 2023 to ramp up sales, and it caused some people to flock to stores to place orders or take delivery, while other folks showed up in protest. People who bought a Tesla in China prior to the second wave of price cuts felt cheated and hoped for a refund, which the automaker will not honor.

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With all of that said, a recent report published by Teslarati points out that Li Auto, Nio, and Xpeng all experienced a notable drop in monthly and year-over-year sales in January. While it's typically expected that an automaker will sell fewer cars in January than it did in December, these EV makers were likely expecting a sales increase when comparing January 2023 to January 2022. China-based analyst Gao Shen shared:

“Apparently, Tesla’s huge discounts [on its Model 3 and Model Y vehicles] siphoned off drivers’ buying interest in the Chinese-developed smart EVs. Overall demand for expensive EVs appears to be weak, which could lead to price wars in the premium EV segment this year.”

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Li Auto's sales were reportedly down 23% year over year, to around 15,000 copies sold in January 2023. Nio sold about 8,500 EVs for the month, down 12 percent from January 2022, and 46% from December 2022. However, Xpeng appears to have taken the biggest hit, with sales down nearly 60% compared to January 2022.

Meanwhile, the week after Tesla's price cuts in China, the most appealing of which amounted to a 13.5% reduction, sales skyrocketed by a whopping 76%, according to China's Merchant Bank. The US EV maker sold over 12,000 units in a single week alone.

Source: Teslarati

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