Tesla China Prices Are Slashed, Stock Falls as Investors’ Concern Grows

Key takeaways

• Tesla has cut the costs of its Model Y crossover and Model 3 in China
• The EV maker has been losing market share despite having a Shanghai Gigafactory
• Tesla’s share price fell as much as 3%, but the domestic EV companies lost more

A reduced Tesla, anyone? The EV maker has slashed prices for the second time in China in a bid to take on the incumbent champion there, BYD. Tesla’s share price slid at the news, but Elon Musk probably thinks the payoff is worth it as the Chinese EV market is ripe. Here’s the lowdown.

As the world shifts to green, ride the wave with Q.ai’s Clean Tech Kit. It’s a handpicked collection of the hottest renewable energy stocks and EV gems. With an AI doing all the heavy lifting, it helps ensure your green footprint also comes with potential green returns.

Download Q.ai today for access to AI-powered investment strategies.

What move is Tesla making in China?

In a Weibo post on Sunday, Tesla confirmed it was dropping prices on two versions of its Model Y crossover by around 14,000 yuan, or $2,000, each. The Model 3 will have a “limited-time insurance subsidy” of 8,000 yuan, or $1,100, until September.

The move marks the latest step in a war between Tesla and Chinese EV makers like BYD, Nio and Xpeng to establish market share. Despite being the biggest EV maker in the world and having a Shanghai Gigafactory, Tesla has been losing out to China’s domestic EV companies.

It’s not the only country Tesla has slashed prices in. A few months ago, Tesla confirmed it was dropping the price of several popular models in the U.S. to coincide with an EV tax credit launch from the U.S. government.

How did the markets react?

At the announcement, Tesla shares fell as much as 3% during Monday trading. The stock has been on a steady decline since the earnings call, having lost 17.68% since then and wiping billions from Tesla’s value.

Investors are likely cautious about what Tesla’s Q2 earnings reflected. While the EV maker saw record sales for the quarter after slashing prices, delivering 466,140 cars in the three months to the end of June, Tesla’s operating income fell 3% to $2.4 billion. This left Wall Street wondering whether the price cuts had impeded the company’s bottom line, as feared.

However, Chinese EV makers also saw a dip in their share prices. BYD fell as much as 6% during Monday trading due to the announcement, while Nio saw a 6.5% decline on Monday’s opening bell. Xpeng shares fell 2.8%. These stock falls suggest that the Chinese companies are just as worried about the increased competition.

The bottom line

Trust the process — that’s what investors often have to do regarding Elon Musk’s decision-making. While price cuts in China might suggest Tesla’s inventory levels are a worry, the fact the domestic EV makers’ share prices have run scared means it could be the boost Tesla needs in the vital market.

With the world veering towards sustainability, ensure your portfolio isn’t left in the past. Dive into Q.ai’s Clean Tech Kit — a curated green haven of renewable energy stocks and EV champions. Backed by a diligent AI, it parses the data to help your clean investing strategy with a robust return.

Download Q.ai today for access to AI-powered investment strategies.