Tesla considering cutting price of Model 3 in China to regain access to incentives

Tesla is considering cutting the price of Model 3 in China to regain access to incentives after the price threshold was recently changed.

As we reported last week, China announced that it cut subsidies for electric cars by 10% this year, followed by further reductions in the next two years. The reduced subsidies are now only available to passenger cars costing less than 300,000 yuan ($42,400).

Tesla’s China-made Model 3 sedan is currently priced at 323,800 yuan ($45,800).

That’s frustrating for the automaker who just managed to get access to the subsidy after starting production at Gigafactory Shanghai since it couldn’t get access to the subsidies for its imported vehicles.

Today, Bloomberg reported that Tesla is considering reducing the price of its China-made Model 3 to get it below the threshold:

The Model 3 made at China’s Shanghai factory starts at 323,800 yuan ($45,700) before tax breaks or rebates. The cut would bring prices of the standard version of the sedan below the 300,000 yuan maximum threshold for electric cars in China to qualify for subsidies, the people said, asking not to be named as the move hasn’t been publicly announced. That would mean a reduction of more than 7.3%. The plan has been submitted to the Chinese government as carmakers typically provide advance notice on such matters to authorities, though it’s up to Tesla whether it will go ahead with it, one of the people said.

The publication reported that the price cut might have to wait until Tesla starts using CATL’s batteries in the made-in-China Model 3 vehicles.

In November of last year, Tesla secured a battery cell supply deal with CATL for Model 3 vehicles built out of Gigafactory Shanghai.

Around the same time, there were reports that Tesla was looking into reducing the price of the made-in-China Model 3 by as much as 20% as they produce more parts locally.

Prior to the change in the government’s EV incentive program, Tesla’s sales have been doing well in the country with a new hit record high during the pandemic.

Last month, Tesla’s sales represented 25% of China’s EV sales.