Tesla has cut prices of its cars in China, as the electric car manufacturer faces increased competition and slowing demand.
This week Tesla’s Chinese website offered a Model 3 sedan at a starting price of 265,000 renminbi, or $36,600, a 5% reduction. The Model Y sport utility vehicle was also made available for 9% cheaper.
Tesla shares dropped on Tuesday by more than 6% before recovering a little, as investors worried about the company’s profitability. Up to this point, its dominance of the market and strong demand for its product meant it could regularly raise prices.
Tesla has had a difficult week. Last Wednesday shares dropped again after third quarter profit figures failed to meet Wall Street expectations. The company posted $3.3 billion in earnings for the third quarter, double the figure from the same time last year, but below investor forecasts. Concerns were also raised about the problems Tesla faced in ramping up production at new factories in Austin, Texas and Berlin.
Tesla stock has also suffered as investors expect the company’s chief executive, Elon Musk, to sell more shares as he attempts to raise the money he needs to complete the purchase of Twitter by the end of this week.
In China, Tesla faces competition from domestic manufacturers such as BYD, SAIC Motor and Nio, all companies which are pushing into the European market as well. The Chinese government reportedly sees the electric car market as an opportunity to break into the world’s top car manufacturers.
In an earnings call last week, Musk hyped up the long-term potential of Tesla, claiming the company could become the most valuable in the world, more than Apple and Saudi Aramco combined. He also painted a rosy short term picture.
“I can’t emphasize enough we have excellent demand for Q4 and we expect to sell every car that we’ve made,” Musk said. “The factories are running at full speed and delivering every car we make.”