Tesla has cut prices in China because of the trade war and it is now clearer why the manufacturer has decided to take the lead. A report shows that its sales collapsed to a few hundred cars in the country last month.
According to the National Association of Passenger Cars via Reuters, Tesla delivered only 211 cars to China last month, down 70 percent from the same period last year.
In previous years, Tesla has grown extremely fast in China, which has become the largest automotive market in the world.
Last year, Tesla made more than $ 2 billion in China, doubling its sales and expanding its presence in retail and its charging infrastructure.
The drop in sales is thought to be related to the trade war between China and the United States, which resulted in the imposition of a new 40% tariff on US vehicles imported into China.
In July, Tesla had to raise prices for S and X models by over $ 20,000 in China due to new tariffs.
Last week, the automaker announced a price reduction of its vehicles in China from 12 to 26% and the reduction of the difference.
It seems we now have the clear reason why Tesla was willing to lower its prices: its sales seem to be stalled (at least for the market).
At present, it is important to note that, since Tesla manufactures lots of vehicles for different markets and transit times to route cars to China, sales can vary significantly from month to month. other in the country.
That said, just over 200 cars still seem extremely low for China at this stage.
It appears that the new tariffs have in fact severely affected the company's demand in China and are now willing to significantly reduce their gross margins in order to maintain market share.
Given the importance of the market that China has been in the last year, I am curious to know if Tesla will change its profitability outlook as a result of these changes.
Personally, I think investors would disagree if that meant that Tesla is focusing on its plans to build Gigafactory 3 in China and start producing cars in the country to bypass tariffs.
It may be the first car plant wholly owned by a foreign manufacturer in the country, which is a big problem.
Whatever it is, I think 2019 will be an interesting year for Tesla in China.