Following similar moves by Tesla China and Huawei-backed AITO, Guangzhou-based electric vehicle firm XPeng has announced a price reduction plan. The drops in price for its G3i model range from 20,000 yuan to 25,000 yuan ($2,951 – $3,689), for its P5 by 23,000 yuan, and for its P7 by 30,000 yuan to 36,000 yuan. The price of its G9 model, launched in September 2022, remains unchanged.
Tesla China recently caused dissatisfaction among previous buyers in China by adjusting prices. XPeng and AITO both launched subsidy schemes for previous car owners while lowering the selling price. XPeng said that for users who ordered its G3i, P5 and P7 within one year before this price adjustment, it will extend the warranty of the whole vehicle to 10 years and provide four years of basic maintenance for free.
Tesla’s impressive profitability provides ample space and confidence for price reductions. In the third quarter of 2022, Tesla’s average net profit per car was $9,570, about eight times that of Toyota.
Neither XPeng nor AITO achieved their sales targets for 2022. Last year, XPeng delivered a total of 120,757 vehicles, which was less than NETA, Li Auto and NIO, and the completion rate of the annual sales target was only 48.30%. AITO delivered more than 75,000 vehicles last year, and failed to achieve the set target of 80,000 vehicles.
Tesla’s sharp price reduction has once again stirred up the Chinese new energy vehicle market in China. Since January 1, state subsidies for new energy vehicles have officially been withdrawn, and many car companies have slightly raised their prices. Affected by the reductions, Tesla’s order volume has increased significantly in the past two weeks, and the passenger flow of Tesla stores in many regions of the country has increased significantly.
According to research by Xiangcai Securities, Tesla’s pricing will affect the product sectors of other new energy automobile enterprises, and the firm’s reductions will inevitably intensify competition. Some insiders believe that in the first quarter of 2023, new energy vehicle makers will be under great pressure and increase preferential efforts.
However, January is the traditional off-season for automobile sales in China, and this year it is coupled with the withdrawal of state subsidies and soaring costs for batteries. Most domestic automotive firms have not yet followed Tesla’s price reduction. Cui Dongshu, Secretary-General of the China Passenger Car Association, said that from February to March this year, the price of lithium carbonate may drop, and car companies will introduce new products and technologies, and they may introduce corresponding price reduction measures.
With these recent price adjustments, the price difference between new energy vehicles and traditional fuel-based vehicles has further narrowed. Taking the Tesla Model 3 as an example, after the price adjustment was introduced on January 6, its starting price has greatly overlapped with the B-class fuel vehicles of joint ventures such as Passat and Magotan. XPeng‘s G3i is also in the same price range as the Honda XR-V and Volkswagen Tharu.