Tesla Cuts of the Price of the Model 3 Sedan in China by 8%

author: FutureCar Staff    

For the past several years, Tesla Chief Executive Elon Musk promised to deliver a more affordable, $35,000 electric car. However with the high cost of EV batteries he was never able to make that happen since the company's mass-market Model 3 launched in July 2017.

However, as EV battery technology improves, California automaker Tesla is getting close to that goal, at least in China, which is the world's biggest auto market. Now Tesla has cut the price of the China-built Model 3 in China by 8%. The price cuts were reported by Reuters.

Tesla's China website now shows the starting price of the standard range Model 3 sedan at 249,900 yuan ($36,805), after Chinese subsidies for electric vehicles are applied. The day before, the starting price for Model 3 was listed at 271,550 yuan ($39,990) after subsidies.

It's likely that Tesla is able to sell the cars for less by using new cobalt-free lithium iron phosphate (LFP) batteries, which cost less to manufacture. Cobalt is one of the most expensive metals used in electric vehicle batteries, so batteries containing cobalt increase the cost of an electric vehicle. The cost of the battery pack in most EVs is equal to roughly 25% of the selling price.

However, Tesla did officially not disclose what type of batteries the $36,805 version of the Model 3 will use, but sources told Reuters this week that the standard range Model 3 sedans would come with lithium iron phosphate (LFP) batteries which are cheaper than the nickel-cobalt-manganese (NMC) cells it used previously. 

The price cuts extend to the longer range Model 3, which now costs 309,900 yuan ($45,639), down from $50,668. The Performance version is priced at 419,800 yuan ($61,823).

Tesla began delivering the first cars built at its Shanghai factory to customers in China last December, helping it save on shipping costs and avoid the country's steep tariffs on imported vehicles. The Shanghai factory is the first auto factory in China wholly owned and operated by an overseas automaker.

Tesla is also building new car manufacturing capacity to eventually produce the Model Y crossover in Shanghai and expects to start delivering them beginning next year.

The Model Y is Tesla's first compact crossover, a popular segment with consumers. Previously Musk said that the Model Y has the potential to outsell all of Tesla's other models combined.

The lower priced Model 3 may help to boost Tesla's sales numbers in China. The automaker sold over 11,000 Model 3s in China during the month of August, a 7% increase compared to July. 

However Tesla is facing growing competition from well-funded EV startups such as Xpeng Motors in both China and now Europe. Xpeng's electric vehicles sell for about half the price of Tesla's vehicles in China.

This week, Xpeng Motors announced it exported its first batch of vehicles to Europe, expanding its global presence. It's the first time the automaker is selling its G3 electric SUV outside of its home country. The vehicles are being shipped to Norway.

During Tesla's Battery Day event on Sept 22, Musk said that Tesla intends to build an even more affordable $25,000 electric car. With the new cobalt-free LFP batteries and its position as the world's most valuable automaker, the company is inching closer towards that goal.

FutureCar Staff