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Did Tesla's Price Cuts In China Backfire? Here's How Customers Reacted To Announcement

Benzinga · 01/07/2023 17:21

Tesla, Inc.’s (NASDAQ:TSLA) price cuts in China announced on Friday may not have gone as planned, at least going by the initial reactions to the move.

What Happened: About 200 Tesla customers, who recently bought one of its made-in-China Model Y and Model 3 vehicles, thronged a delivery center in Shanghai to protest against them receiving the short shrift, Reuters reported.

For the unversed, Tesla handed out price cuts in the range of 5.7%-13.5% for its Giga-Shanghai-made vehicles after it announced a sharp drop in deliveries in China for the month of December.

The aggrieved customers reportedly protested against Tesla’s announcement, suggesting that they missed out on the benefit of the price cuts as they bought vehicles in late 2022 to take advantage of the government subsidy, which was set to expire at the end of the year.

Tesla faced a wider backlash, with customers seen protesting at Tesla stores and delivery centers in other Chinese cities from Chengdu to Shenzhen, Reuters said, citing videos posted on social media. They did not take kindly to the fact that the company abruptly announced the price cuts and has not given an explanation to recent buyers.

The customers reportedly demanded, during a police-facilitated meeting with Tesla staff, an apology as well as compensation or other credits. The company has reportedly agreed to provide a response to the demands by Tuesday.

A Tesla China spokesperson reportedly told Reuters that the company does not plan to compensate buyers who took delivery before the most recent price cut.

A Tesla influencer had earlier shared a video of a crowd thronging a Tesla delivery center, wherein police were also seen, mistakenly assuming there was a jostle to buy cars following the price cuts.

Why It’s Important: Tesla is confronting one of its worst fundamental crises since 2018 when the EV maker faced trouble ramping up Model 3 cars and was in danger of running out of funds. Demand has slowed down due to the softening of global economic growth amid rate hikes by major global central banks to rein in inflation. Additionally, Tesla began to face competitive pressure, especially in its key market - China, from the domestic upstarts.
Future Fund’s Gary Black has repeatedly called to CEO Elon Musk’s attention the need for a sub-$30,000 car in China, a category where Warren Buffett-backed BYD Manufacturing Company Ltd. (OTC:BYDDY) (OTC:BYDDF) is doing very well.

The price cuts, while having the potential to perk up the volume, may have an undesirable effect on margins and in turn profitability. Following the recent price cuts in China, Tesla China Vice President Grace Tao suggested the reductions were made possible due to the improved cost structure in China.

Tesla closed Friday’s session 2.47% higher at $113.06, according to Benzinga Pro data.

Read next: Tesla's Deep China Price Cuts, Rivian Hit By Production Woes, Sony-Honda Make Splash With 'Afeela' And More: Biggest EV Stories Of The Week

Photo: courtesy of Shutterstock.