Tesla Slumps to 16-Month Low as China Slowdown Spurs Price Cuts Golie Mark

(Bloomberg) — Tesla Inc. shares fell to the lowest since June of last year after the carmaker lowered prices across its lineup in China, where competitive and economic pressures are intensifying.

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The carmaker cut the cost of the cheapest locally built Model 3 sedan by 5% to 265,900 yuan ($36,774), its website showed Monday. The company dropped the starting price of the Model Y SUV by 8.8% to 288,900 yuan.

The move sent Tesla’s stock down as much as 7.4% to $198.59 in New York trading, the lowest intraday in 16 months. US-listed shares of Nio Inc., Xpeng Inc. and Li Auto Inc. all plunged at least 23% at their intraday lows after President Xi Jinping’s unprecedented power play sparked a rout of Chinese equities.

Tesla’s cuts reflect the tougher time international carmakers are having going up against local manufacturers led by BYD Co. — which sold a record 200,973 vehicles last month — and upstarts including Nio and Xpeng, which are expanding their lineups. Domestic automakers accounted for almost 80% of electric-vehicle sales through the first seven months of the year, according to China’s Passenger Car Association.

Chief Executive Officer Elon Musk also flagged last week that demand has been “a little harder” to come by due to China’s property market slowdown and Europe’s energy crisis. He said during Tesla’s earnings call that while prices of some commodities have eased, other inputs for EVs including battery-grade lithium are still “crazy expensive.”

Read more: Tesla Smacks Nio in China, Likely Weighs on Views

The price changes partly reverse several rounds of hikes by Tesla earlier this year after Musk flagged rising costs of raw materials and logistics. The company is now looking to goose sales in a market from which it derives almost a quarter of revenue, which fell short of estimates last quarter.

“EV competition this year is very fierce, and Tesla’s performance may not match its expectations,” said Yale Zhang, managing director at Shanghai-based consultancy Autoforesight Co. “Hence, it decided to hit its rivals with a direct blow by cutting prices to further boost sales in the last two months of the year.”

Tesla delivered a record 83,135 cars in China last month, including 5,522 for export, after upgrading production capacity at the Shanghai factory. The plant can now produce about 1 million cars a year.

A representative for Tesla China said that improved utilization of the company’s Shanghai factory and “relative stability” of the supply chain have contributed to lower costs, and that the carmaker has always priced its vehicles based on costs.

Delivery times in China have shortened to just one to four weeks for the Model Y, and four to eight weeks for the Model 3, according to the company’s website. Lead times were as long as 22 weeks earlier this year, AllianceBernstein analysts wrote in a report last week.

“It is an expected price cut,” said Wang Hanyang, an automotive analyst at Shanghai-based 86Research Ltd. “Order inflow for Model 3s and Ys haven’t fulfilled the expanded production capacity, as you can tell from the shortened wait time. The company needs to secure more orders by cutting prices.”

–With assistance from Craig Trudell.

(Updates share move in the headline and third paragraph.)

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