The world’s largest automobile industry was shaken by the price cut-off put up by Tesla Inc. This threatened many automakers out of business.
It first started in October, Elon Musk’s Tesla, a significant player in China’s hypercompetitive market, reducing the cost of vehicles made at its sizable factory outside of Shanghai. The situation worsened in January when Tesla offered another reduction, bringing the price of its locally produced vehicles down by as much as 14% from the previous year and, in some instances, by as much as 50% from the US and Europe.
Rivals were forced to copy the moves as they had no choice but to do so. Local start-ups like Xpeng Inc. and Nio Inc. were among them, in addition to well-known worldwide names like Volkswagen AG and Mercedes-Benz Group AG, who were providing discounts of up to 70,000 yuan ($10,000). The starting price of Ford Motor Co.’s Mach-E electric sport utility vehicle has decreased to 209,900 yuan, or nearly a third less than in the US.
Customers are becoming more selective and demand is strong, Feng said, adding that Nio is confident of meeting its target of a quarter-million EV sales this year, more than double its 2022 total. Tesla’s head of production Tom Zhu has said the company’s price cuts “generated huge demand.”
The China Association of Car Manufacturers demanded that the pricing war halt, arguing that it wasn’t a sustainable response to a slowdown in sales and the buildup of inventories and that the sector should “return to normal operation” to safeguard its healthy development.
This week, comments in state media argued that it was illegal for regional administrations to provide incentives for locally-made vehicles. For instance, Hubei province and the government-backed Dongfeng Motor Group Co. reduced the cost of Citroen C6 vehicles by as much as 90,000 yuan or approximately 40%.
The reaction in the market has been very mixed to this incident, After the company’s implemented the discounts the shares of Tesla fell sharply, but they are now on the rise and are outperforming major Chinese EV manufacturers by a wide margin.