Tesla goes against the grain in China by slashing price of premium car

In China, where higher prices mean prestige, Tesla, a US maker of luxury electric cars, is taking a bold step to win customers and cachet by restricting its mark-up to half of what some of its rivals can command.

Though it risks relegating its brand to a lower tier, Tesla's marketing strategy could prove a model for other imported brands, which have come under fire from state media and regulators for allegedly ripping off shoppers with inflated prices.

In an unusual blog post last month, the firm announced the lower-than-expected 734,000 yuan (HK$933,000) China price tag for its high-end Model S electric car. The price, still 50 per cent higher than in the United States, includes only "unavoidable" taxes and transport costs, it said.

"If we were to follow standard industry practice, we could get away with charging twice as much for the Model S in China as we do in the United States. But we're doing things differently," Tesla said in the blog post on January 22, reposted to consumers through popular social media channels on the mainland.

Analysts said the lower price strategy could deter buyers in the premium segment, who are usually willing to spend extra to guarantee quality and cachet.

"Price transparency helps, because people see that as different, but the lower price itself, I don't see a big impact from that," said Andreas Graef, Shanghai-based principal focused on vehicles at consultancy A.T. Kearney.