Tesla Seeing Demand Surge After Price Cuts Leads To Rivals Aping Move As Xpeng Joins The Party

Tesla, Inc. TSLA has announced a string of downward price adjustments in China since late last year and followed up with two rounds of price cuts in the U.S. and Europe.

Reports from local media in China suggest orders surging in response to the most recent price cuts announced on Jan. 6.

What Happened: Chinese electric vehicle maker XPeng, Inc. XPEV has responded with steep price cuts of its own, according to the company’s Weibo account.

The Guangzhou-based EV maker has cut the prices of its vehicle models by up to 12.5%. The G3i SUV prices have been cut from 168,900 yuan ($24,935) to 148,900 yuan, Bloomberg first reported. The P7 sedan prices have dropped to 249,900 yuan but the price of the recently rolled out G9 vehicle has remained unchanged.

See also: Best Electric Vehicle Stocks

Why It’s Important: Ever since Tesla went aggressive with its pricing strategy, analysts have been sounding out an imminent threat to rivals.

Morgan Stanley’s Adam Jonas said in a recent note that Tesla’s price cut is an adverse fundamental development for the EV pioneer, reflecting his view that margins will likely erode significantly.

He, however, cautioned against a ‘far worse’ predicamental for its rivals. Rival EV manufacturers now face the prospect of taking prices down or see a significant reduction in market share, if not an outright absolute volume drop, he said. The analyst also sees the need for legacy automakers to rethink their EV strategies.

Price Action: XPeng shares were slipping 3.40% to $9.65 in premarket trading on Tuesday, according to Benzinga Pro data.

Read next: 'Elon Musk, You Wiped Out $10K In Value Off My 4-Week-Old Tesla Overnight:' Livid Customers Frustrated At Missing Out On Recent Price Cuts