Some Tesla vehicles built at the carmaker's new Shanghai Gigafactory may see their prices slashed as demand slows in the world’s largest auto market, according to a report.
Continue Reading Below
The price of the mass-market Model 3, which starts at 355,800 Chinese yuan ($50,800), may be lowered as much as 20 percent, Bloomberg says, citing people familiar with the plans. The company aims to reduce costs by sourcing local parts and avoiding tariffs since the vehicles are being produced domestically, the report said.
Tesla shares were little changed ahead of the opening bell.
The Palo Alto, Calif.-based company didn't immediately respond to FOX Business’ request for comment.
Consideration of a Model 3 price cut comes as Chinese demand for electric vehicles has slowed sharply.
“Although the decline in China's auto production and sales has continued to narrow, the overall market recovery has been slow, and consumer confidence is still insufficient,” the China Association of Automobile Manufacturers said in its November report, adding that the “trend of China's economic stability and long-term improvement has not changed.”
Sales of pure electric vehicles in China totaled 81,000 in November, down 41 percent from a year ago, as Beijing reduced subsidies in an effort to spur innovation. Earlier this year, China's Ministry of Finance said electric vehicles must have a range of 250 kilometers in order to qualify, up from 150 kilometers.
The slowdown in China's auto market hasn’t been limited to electric vehicles. Sales totaled 23.1 million units through the first 11 months of 2019, down 9.1 percent from a year earlier as the Chinese economy slowed amid a trade war with the U.S. and growing domestic debt. The economy's growth of 6 percent in the third quarter was its weakest since recordkeeping began in 1993.
Tesla broke ground on the $2 billion Shanghai Gigafactory in January, and the first Model 3 sedans began rolling off its assembly line in November. The carmaker plans to build 250,000 vehicles at the plant each year.
Tesla shares have surged 49 percent since Oct. 23, when the company posted a surprise third-quarter profit of $143 million. The better-than-expected-results have forced short-sellers, traders betting the stock would fall, to scramble to close out positions and curb losses.