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Tesla's Model 3 and Model Y Prices Increase in China as the Country's EV Subsidies Are Reduced

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【Summary】China’s electric vehicle market, which is the world’s biggest, will soon go through some major changes with reduced government subsidies. As a result, Tesla is hiking the prices of some of its most popular models in China. Tesla has already increased the price of two of its most popular models in China, the Model 3 and Model Y.

Manish Kharinta    Dec 01, 2021 8:30 AM PT
Tesla's Model 3 and Model Y Prices Increase in China as the Country's EV Subsidies Are Reduced

In recent years, Tesla's has given precedence to its exports over domestic shipments. In October for example, Tesla prioritized exports of its China-built Model 3 and Model Y models, many of which were headed to Europe which is a big market for the automaker.

The California electric vehicle pioneer exported 40,666 electric vehicles from its Shanghai factory in October, whereas domestic shipments in China totaled just 13,725 vehicles.

According to recent reports, China's electric vehicle market, which is the world's biggest, will soon go through some major changes with reduced government subsidies. As a result, Tesla is hiking the prices of some of its most popular models in China. The company has already increased the price of its most competitively-priced offering, the Model 3.

Tesla's Model 3 (RWD) now costs RMB 255,652 (US$39,993) in China, which represents a 1.9% increase. The RWD Model Y is now priced at RMB 280,752 (US$43,920), which makes it 1.7% more expensive. 

Tesla has been tussling with its pricing strategy since early 2020 to maintain its margins. One of the reasons is that China has been decreasing the price cap at which vehicles qualify for EV subsidies. Tesla was forced to lower its prices to meet the subsidy eligibility requirements, which were capped at vehicles costing less than RMB 300,000. 

In May 2020, Tesla discounted the Model 3 by 10%, from RMB 303,550 (US$47,667) to RMB 271,550 (US$42,646) in order to get under RMB 300,000 cap to qualify for the incentives. But Tesla had already increased the price of Model 3 earlier this year. 

It's likely that subsidies on EVs in China will continue to drop. The subsidy for the purchase of an EV will be lowered from RMB15,840 (US$2,478) to RMB 11,088 (US$1,735). The changes are expected to take effect sometime next year.

It means that Tesla's Model Y and Model 3 will become a bit more expensive in China for all of the new orders placed. The delivery dates for the Model 3 and Model Y in China are now listed as the first quarter of 2022 on Tesla's website. 

Although EV incentives in China are available for vehicles that cost less than RMB 300,000, there is no cap on the prices of BEVs like the ES6 SUV from Tesla's rival NIO, which come with a battery swapping feature. However, vehicles that support battery swapping must meet several other conditions and meet the required range figures.

Since China is the world's biggest auto market, it's worth noting that changes to EV subsidies might have an industry-wide effect on sales.


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