Tesla cuts prices of Model S and Model X cars in China to absorb trade war tariffs

Tesla has cut the prices of its cars by up to a quarter in mainland China, four months after it increased them to offset the tariffs imposed by Beijing as part of the US-China trade war.

The bestselling American electric carmaker said the move was aimed at making its models more affordable to Chinese customers.

The Model S sedans and Model X SUVs will see their prices reduced by 12 to 26 per cent from Thursday, the company said in a statement.

In July, Tesla raised the prices of the two models by about 20 per cent on the mainland after Beijing slapped an additional 25 per cent tariff on American-made vehicles, a retaliatory measure against the US administration as trade tensions between the two countries escalated.

“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.

The price of the Model S 75 D comes down by 104,700 yuan (US$15,000) to 782,900 yuan, while the Model X 75 D has a new price tag of 861,800 yuan, down 113,900 yuan from four months ago.

The company also announced that its new Model 3 cars would have a starting price of 540,000 yuan (US$77,800) in mainland China. The model’s performance version will sport a price tag of 595,000 yuan.

The Model 3 cars are at the pre-sales stage in mainland China, the world’s biggest new-energy vehicle market.

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“Tesla lovers like me will consider buying a Model X after the price cuts,” said Franco Feng, a Shanghai-based entrepreneur. “I believe the carmaker’s move to reduce prices will help it attract a number of customers.”

American-made cars now face a 40 per cent import duty after Beijing imposed an additional punitive tariff of 25 per cent in July.

China, the world’s largest car market, reported slowing vehicle sales in October after 26 years of buoyant growth. Last month, 2.39 million vehicles were sold, down 11.6 per cent from a year ago.

The mainland is expected to report a dip in sales for the whole of 2018, the first annual decline since 1992, analysts said.

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But the new-energy vehicle segment is seen as a bright spot in the country’s auto industry.

It is one of the 10 key manufacturing sectors included in the “Made in China 2025” industrial strategy. The central government wants domestic companies in the designated industries to catch up with global leaders by 2025.

Tesla sold 17,000 vehicles in mainland China in 2017, a jump of 51.6 per cent from the previous year.

In October, Tesla secured an 860,000 square-metre piece of land in Shanghai for its planned “Gigafactory 3”, the company’s first plant outside the United States.

Chief executive Elon Musk said in August the company expected to invest US$2 billion initially to produce 250,000 electric vehicles at the Shanghai plant.