Tesla’s recent price cuts in China are reportedly leading to “significant cancellations” for Chinese EV brands. However, shipments are declining month-on-month in October.
Last month, Tesla announced some significant price cuts for the Model 3 and Model Y in China.
This was major news for Tesla as there were early signs of a slowdown in demand for the automaker, including much shorter lead times.
It’s the first time Tesla has actually pulled a demand lever since those signs of a demand slowdown emerged.
The move was also significant because Tesla has only cut prices in China, a hugely important market for electric vehicle sales.
Today, China’s Passenger Car Association released the country’s vehicle production for October 2022 and confirmed that Tesla production from Gigafactory Shanghai was 71,704 cars – down from 83,000 in September.
However, month-to-month isn’t really the best way to look at Tesla’s production in China, which can always be somewhat cyclical. It’s usually better compared to the same month in the previous quarter, but that was July 2022, which was terrible for Tesla with just 28,000 units due to a factory shutdown.
The price cuts were also too recent to affect supplies, but according to Citi analyst Jeff Chung, the price cuts are affecting demand.
In a Thursday report, Chung said they have been checking with dealerships and believe Tesla’s price cuts have resulted in “significant order cancellations”:
We believe that Tesla’s recent price-cutting strategy has created a negative spillover effect, with many Chinese EV brands’ backlog suffering significant order cancellations, according to our dealer channel audits.
He didn’t name the brands directly, but companies like NIO and Xpeng are considered Tesla’s biggest direct competitors in China.
Based on the timing of Tesla’s price cuts and increase in production capacity at Giga Shanghai, the impact will most likely be felt in November and December numbers.
There were rumors that Tesla intentionally limited production at Giga Shanghai in the fourth quarter, but the automaker denied the rumors during its third-quarter financial results.
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