Tesla Slashes China EV Prices By 5% To Push Up Volume, Base Model Y Now Eligible For Subsidies — But There's A Flip Side

Tesla, Inc. TSLA is cutting prices for its Giga Shanghai-made cars by about 5%, reversing the price hikes announced earlier this year.

What Happened: Made-in-China basic Model 3 price is now listed at 265,900 yuan ($36,663) on Tesla’s Chinese website, effective Monday. This marks a decrease from the previously-listed price of 279,900 yuan.

The starting price of the Model Y SUV is reduced from 316,900 yuan to 288,900 yuan.

Tesla’s China factory faced disruptions twice this year. COVID-19 resurgence forced a nearly month-long shutdown mostly in April. Subsequently, in July, the factory was shut down for upgradation.

Made-in-China vehicle sales rebounded strongly in August and September after the Giga Shanghai reopened following the disruptions.

See Also: Best EV Penny Stocks

Why It’s Important: The price cuts reflect the intensifying rivalry in China, as domestic startups such as BYD Co. Ltd. BYDDY BYDDF and Nio, Inc. NIO ramp up production and expand their product lineups. Tesla could win on volume by pricing its vehicles competitively.

With the Model Y Standard Range prices now below the 300,000-yuan level, vehicle buyers can get an extra 12,000-yuan subsidy, according to Future Fund’s Gary Black. The fund manager expects this move to help perk up volumes in China.

On the flip side, reduced prices could eat into the average selling price and, in turn, margins. Tesla recently reported a revenue miss for the third quarter, with analysts attributing the topline softness to relatively cheaper prices for its China-made vehicles.

Price Action: Tesla closed Friday's session up 3.45% at $214.44, according to Benzinga Pro data.

Read Next: Elon Musk Hints At 'Epic' Q4 After Revenue Miss, GM's Pricey Cadillac Celestiq Draws Flak, Automakers To Double Down On EV Spending And More: The Week's Biggest EV Stories