On October 25, The Paper learned from a sales store of AITO, a Chinese automaker established jointly by Huawei and Seres, that its M5 and M7 models have undergone price reductions of 8,000 yuan ($1,096). AITO is the first new energy vehicle brand in China to follow in the footsteps of Tesla’s latest decision, and many industry insiders now believe that a tide of price cuts across the domestic auto sector is about to begin.
Huawei explained that, from the early morning of October 24, insurance worth 8,000 yuan would be provided to buyers of some existing vehicle models. Moreover, vehicle dealerships would not cover the interest for consumers who paid by installments, and any bonus offers or other services offered by each store would be canceled.
AITO’s extended-range M5, M5 EV and M7 models are all sold on Huawei’s online and offline channels. Richard Yu, CEO of Huawei’s Terminal BG and CEO of its Smart Car Solution BU, participated in the launch event for every model.
According to previously released sales data, AITO delivered a total of 10,100 vehicles in September this year, reaching over 10,000 vehicles for two consecutive months, and a total of 27,400 vehicles were delivered in the third quarter of this year. As a brand that just started deliveries in March, this figure has already surpassed many competitors in the industry. Its latest model, a pure-electric version of the M5 SUV, has a price range of 288,600 yuan to 319,800 yuan, making it a rival to Tesla’s Model Y.
On October 24, Tesla China’s official website showed that price reductions of its Model 3 and Model Y ranged from 14,000 yuan to 37,000 yuan, instigating many consumers who had recently purchased cars to defend their rights. Tesla responded that if they already placed orders but had not yet picked up their new cars, they could enjoy the newest price.
After this price reduction, the Model Y rear-wheel drive version has dropped back to less than 300,000 yuan, qualifying it for a subsidy of 10,000 yuan, enhancing its attractiveness to consumers. The Model Y is currently Tesla’s most popular model in China. According to data from the China Passenger Car Association, Tesla sold 318,000 vehicles in China from January to September this year, up 55.4% year-on-year, among which Model Y sold 219,100 units, up 135.8% year-on-year, ranking first in the sales of high-end SUVs in China (with a price of over 300,000 yuan).
According to documents released by Tesla on October 24, the company’s total revenue in the third quarter was $21.454 billion, of which revenue in the Chinese market was $5.131 billion. In the first nine months of this year, Tesla’s revenue in China was $13.568 billion, up 50.5% year-on-year and maintaining the country’s position as the second-biggest Tesla market after the US.
In view of Tesla’s ongoing price reductions, Soochow Securities believes that it will bring about a passive change in the pricing strategies of various other car companies in China such as BYD, Geely and Changan Automobile. NEVs and fuel-based vehicles in the price range of 200,000 yuan to 400,000 yuan will be directly affected.
In addition, Soochow Securities predicted that Tesla will obtain more room for price reductions after ensuring high profits, driven by factors such as scale effect of vehicle production, technological innovation, and cost reductions in its supply chain. A new round of price reductions is likely to start in the next three to six months.