Tesla Might Lower China-Built Model 3 Prices Next Year

Tesla Inc TSLA is considering to lower the price of its China-built Model 3 sedans by 20% or more in 2020, according to Bloomberg.

What Happened

Sources told Bloomberg that Tesla is planning to use more local components in its China-built Model 3 sedans so that it can cut the vehicle’s prices by at least 20% next year.

Using more local components will help the company save on import tariffs, said the unnamed sources to Bloomberg.

Prices of the Model 3 sedans, which Tesla will manufacture in its new Shanghai factory, will start at 355,800 yuan ($50,547.67), but now sources said that the company could further lower the price from the second half of 2020.

Why It Matters

Tesla announced its plans to launch an electric vehicle manufacturing company in Shanghai back in July 2018.

The construction of the Shanghai plant, the company’s first factory outside the U.S. started in January 2019.

Elon Musk, Tesla's CEO, tweeted that the company would build "affordable versions" of the Tesla Model 3 in China at the time.

The U.S. automaker is facing rising competition in the China EV market from other automakers like Bayerische Motoren Werke AG BMW and Daimler AG DAI, which are also planning to launch electric vehicles in China.

If Tesla does cut the price of its China-built Model 3 sedans, it would put pressure on its local rivals like Xpeng Motors and Nio Inc - ADR NIO to do the same, according to Bloomberg.

Price Action

Tesla's shares fell 0.66% and closed at $378.99 on Tuesday.