Tesla Plans To Reduce Shanghai-Manufactured Model 3 Price By 20% In 2020

Electric vehicle maker Tesla is reportedly considering reducing the prices of Made In China (MIC) Model 3 sedans by 20 percent or more in 2020. Current prices of the model manufactured in the company’s facility in Shanghai is at 335,800 Yuan, or approximately $50,547.67 will most likely be lowered in the second half of 2020, according to Bloomberg, citing people familiar with the said plan. The timing and scale of the price cuts could still change based on the situations in the market, the report adds.

The US electric vehicle maker plans to lower costs by importing fewer parts, avoiding tariffs, and using more local components. A 20 percent price cut would drop the base price of Tesla Model 3 below 300,000 yuan, which could improve Tesla’s position in the EV market in China. Tesla rival Xpeng earlier announced that its P7 sedan will cost between 270,000 yuan and 370,000 yuan.

NIO, another Chinese electric vehicle maker, is selling its cheapest ES6 sports utility vehicle at 358,000 yuan. China’s auto market recently struggled through an unprecedented slump, but competition in the industry is still heating up. For months, sales of electric vehicles dropped following the government’s decision to scale back subsidies.

The potential price cut of MIC Model 3 is sensible of the competition, but it could also impact the initial sales of the company, according to Shanghai-based consulting firm founder Bill Russo. Consumers might hold out in anticipation of the lower prices, Automobility Ltd founder adds. Tesla CEO Elon Musk earlier predicted that Tesla Gigafactory 3 would produce at least 1,000 units every week by the end of 2019.

A significant portion of the planned Model 3 price cut will depend on batteries, which are the most expensive component of an electric vehicle. At present, the company sources its batteries from Japan’s Panasonic group. However, several reports claimed that this might change soon as Tesla reportedly agreed to purchase batteries from LG Chem Ltd.

The electric vehicle maker also reportedly made a deal to use batteries produced by China’s Contemporary Amperex Technology Co. Ltd as early as 2020. Tesla Gigafactory 3, based on recent drone videos, is steadily producing Tesla Model 3 following the approval of the Chinese government for its sales and production of electric vehicles.