Sections

ideals
Business Essentials for Professionals

Tesla Lowers Car Prices Exclusively For Chinese Consumers Despite Trade Tariffs


11/22/2018


Tesla Lowers Car Prices Exclusively For Chinese Consumers Despite Trade Tariffs
US based electric car maker Tesla is aiming to capture the Chinese market as has been evident from its most recent pricing strategy where the company announced on Thursday about a reduction in offer prices for its Model X and Model S cars for Chinese consumers. While the company is already facing a hit because of the higher import tariffs on US cars into China in a retaliatory tariff against the US tariffs on Chinese products, this price reduction would add to that financial hit for the company.
 
Despite the hit that the company is already taking because of the trade war, it willingness to take on an additional hit by price reduction clearly indicates its intention make it big in the largest and the fastest growing electric car market in the world – China, said analysts.
 
The price cut as announced by the electric car maker, founded and headed by billionaire CEO Elon Muck, would be in the rage of 12 per cent to 26 per cent. The company said that the aim of this pricing strategy is to make the models more affordable for the consumers of a market where the so called new energy car market is growing very fast.
 
This strategy of Tesla has been taken over and above the impact of the escalating trade war between the two largest economies of the world which has witnessed tariffs and counter tariffs being imposed on each others’ products worth billions of dollars by both the countries.  Chinese import tariffs on US goods include those in the automobile segment which has hit Tesla because it imports all of the cars that it sells in the Chinese market from the US.
 
"We are absorbing a significant part of the tariff to help make our cars more affordable for customers in China," Tesla said in a statement sent to the media.
 
This new pricing strategy exclusively from the Chinese market is a diametric shift in its strategy which saw the company raising prices of its cars in July and was amongst the very first companies to do so in the wake of the anticipated hit because of the tariffs. A price hike of about 20 per cent was announced back then by Tesla for its Model X and S cars.
 
The new tariff regimen was making it very difficult for Tesla to sell cars in China because of the increased prices for consumers, the company had warned last month, and had added that this situation was forcing it to hasten the pace of investments in its new and first overseas Gigafactory which is coming up in Shanghai, China. Once the production and assembly unit in China is up and running, Tesla would be able to avoid the impacts of the trade war with China and the increased tariffs. The property was acquired by Tesla recently.
 
Chinese consumers, who wanted to book the new Model 3 car as announced by Tesla recently when it launched the online booking, said that the same model would not have a starting price of 540,000 yuan ($77,928.83) for a dual motor all-wheel drive version, its performance version  would come at a starting price of 595,000 yuan.
 
(Source:www.financialtimes.com)