China EV price war: Nio, Xpeng and Li Auto report steep sales plunge as Tesla’s recent discounts lure buyers

The top three domestic makers of high-end electric cars recorded monthly and year-on-year sales declines in January
Some of the drops exceed 50 per cent, after Tesla’s early January price cuts appear to have been effective

Electric & new energy vehicles

Daniel Renin Shanghai

Published: 8:30pm, 1 Feb 2023

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China’s top three makers of premium electric cars got off to a slow start in 2023 as the weeklong Lunar New Year holiday disrupted production and sales slowed following recent Tesla price cuts and the end of a government subsidy.

The country’s top three domestic manufacturers of high-end electric vehicles (EVs) – Nio, Xpeng and Li Auto – all recorded monthly and year-on-year sales declines in January, with some of the drops exceeding 50 per cent.

Shanghai-based Nio delivered 8,506 vehicles to mainland customers in January, down 46.2 per cent from December and 11.9 per cent from the same period in 2022.

Guangzhou-headquartered Xpeng said its January deliveries dropped 53.8 per cent from a month earlier to 5,218 units, representing a year-on-year decline of 59.6 per cent.

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Li Auto in Beijing handed over 15,141 vehicles to buyers, 28.7 per cent fewer than in December and 23.4 per cent below January 2022 deliveries.

Most carmakers suspended manufacturing and sales during the Lunar New Year holiday from January 21 to 27, and Beijing phased out a cash subsidy granted to EV buyers as of January 1.

However, analysts also see Tesla’s recent price reductions as a factor.

“Apparently, Tesla’s huge discounts [on its Model 3 and Model Y vehicles] siphoned off drivers’ buying interest in the Chinese-developed smart EVs,” said Gao Shen, an independent analyst in Shanghai. “Overall demand for expensive EVs appears to be weak, which could lead to price wars in the premium EV segment this year.”

On January 6, Tesla slashed prices of its Model 3 and Model Y EVs by as much as 13.5 per cent after recording a 44 per cent month-on-month drop in deliveries in December, according to data from the China Passenger Car Association (CPCA). The across-the-board cuts followed discounts of up to 9.4 per cent initiated on October 24.

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As a result, the prices of Tesla’s EVs in China have fallen to their lowest levels since the first vehicle rolled off its Shanghai production line in December 2019.

The tactic appears to have been successful, as Tesla’s sales shot up 76 per cent to 12,654 cars in the week of January 9 to January 15, compared with the previous seven days, according to data compiled by China Merchants Bank.

Since late last year, more Chinese car buyers have been opting for cheaper EV models sold by domestic carmakers like BYD as they face worries about shrinking wages and low job prospects across the country.

BYD expects to post a record quarterly profit for the final three months of 2022, with surging sales lifting earnings by up to 13 times.

Xpeng followed Tesla’s price reductions with its own slashing on January 17, offering discounts of up to 13 per cent on some of its models to make its cars more accessible for Chinese drivers.

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On Wednesday, Reuters reported that Tesla would gear up production at its Shanghai Gigafactory in February and March amid surging orders for the Model 3 and Model Y after the price reductions.

The Texas-based carmaker plans to produce nearly 20,000 units a week, or more than 80,000 cars a month, on par with the level in September when it churned out 82,088 units.

Tesla largely reduced output at the Gigafactory 3 in December and January as demand for the two models declined.

In January, the factory operated on only 17 days, with output crimped between the New Year holiday, which ended on January 2, and January 19, ahead of the Lunar New Year holiday.