BEIJING, August 14 (TMTPost)— More signs showed price war resurgence in China’s electric vehicle (EV) sector.

Credit：Visual China

Tesla said on Monday that it has reduced the starting prices prices for certain Model Y long-range and performance versions by RMB14,000 (US$1,935), or down 4.5% and 3.8%, in China. Following the cuts that day, two versions now cost as low as RMB299,900 and RMB349,900, respectively. While prices of the affordable Model 3 didn’t change, Tesla said it would offer insurance subsidies of RMB8,000 from August 14 to September 30 for purchases of the entry-level, rear-wheel-drive versions of the Model 3 vehicles in inventory.

At least 10 Chinese automakers announced price cuts for their EVs this month, The Paper, Chinese digital newspaper owned by the Shanghai United Media Group, estimated following EV company Zeekr’s move. Zeekr said on last Friday that it slashed price by RMB30,000 to RMB37,000 (US$4,150 to US$5,120). This is the first time for the Geely Automobile unit to directly cut prices of its first model Zeekr 011 as it previously made some special offers for buyers. After the adjustment, Zeekr 011 now costs as low as RMB269,000 in China.

Some of Chinese emerging EV makers and established automobile manufacturers have taken the similar action earlier this month. Hangzhou-headquartered Leapmotor announced price cut between RMB10,000 and RMB20,000 on August,1. Under the promotional campaign in summer vacation, Leapmotor offered a 10% discount for its 2023 Leapmotor C01 Smart Editionwith a range of 717 kilometer on a single charge, representing a reduction of RMB20,000. Hozon Auto’s EV brand Neta Auto, or Nezha in Chinese, launched a price cut of RMB30,000 for its 2022 Neta S model, with the cheapest one now priced at RMB159,800.

Changan Ford, a joint venture between state-owned Changan Automoile and U.S. giant Ford Motor Company, announced on August 1 a promotional package including one-time price cut of RMB40,000 when it completely took over Ford Mustang Mach-E operations in China. The next day, Chery rolled out a campaign in summer to cut its new energy vehicle (NEV) models by up to RMB10,000. SAIC Motor said on August 3 that it started to provide the maximum discount of RMB26,000 for four models under the MG margque including MG5 Scorpio, the third-generation MG6 PRO, and MG ONE.  A day after SAIC’s move, Great Wall Motor’s NEV brand Haval Xiaolong launched an event at e-commerce platforms this month, which provides buyers a cash discount range between RMB2,000 and RMB8,000, along with cash vouchers worth up to RMB12,000 for certain buyers from August 5 to 26.

China Passenger Car Association (CPCA) earlier this month released retail sales of passenger cars reached 1.775 million units, the second highest volume in July, even the sales represents a 2.3% year-over-year (YoY) decline and a 6.3% month-over-month (MoM) decline. While sales in July in historical records usually ranked the lowest after February, this year’s July witnessed the second highest retail sales of passenger cars to the date of the year, second only to sales in June, so sales in the past month maintained relatively strong even it had a modest slip from the peak, CPCA commented.

CPCA noted the continuous and intensive promotion in the first half of the year disrupted the normal price move of the automarket, while in promotion trend generally returned normal in July. Looking forward the next half of the year, CPCA expected promotions would last and not ruled out some auto companies’ additional promotions against the trend of normalization.  

More than 40 brands in China have reduced prices since January after Tesla intensified price war this year to boost demand, Reuters reported last Friday. Tesla lowered price by up to 13% in China on January 6, making the starting price of Model Y and Model 3 down to new low and about 43% and 30% cheaper than those on sale in U.S. But Tesla China surprisingly raised prices twice in four days in May after CEO Elon Musk signaled more cuts to come at the earnings call in April.

Tesla last month posted the non-GAAP diluted earnings per share (EPS) fell 21% YoY to $0.85 in the second quarter of the year, just shy of the estimated $0.86. That is the first yearly drop in non-GAAP EPS since the third quarter in 2019. Its gross profit margin that quarter dipped below 20% to a two-year low 19.3%, missing analysts’ estimated 22.4%.

While Tesla’s quarterly earnings were severely dented by major price cuts, Musk played down the weakened margin and considered more price cuts at an earnings call. "The short-term variances in gross margin and profitability really are minor relative to the long-term picture. Autonomy will make all of these numbers look silly," said Musk.  The executive said his company will have to keep cutting the prices of its vehicles if interest rates continue to rise.