Chinese electric vehicle maker Xpeng announced Tuesday it would cut prices on some of its most popular models. The move comes after Tesla and others in the region have implemented similar price drops, fueling what could be a competitive pricing war in China.
Xpeng cuts prices in China, joining Tesla
Earlier this month, Tesla slashed Model 3 and Model Y prices by up to $7,000 in China, the second cut in recent months.
The price cuts and a short delivery lead time (one to four weeks) for Tesla models in China suggest a demand problem could be in the works. Reducing prices is not typical for Tesla. The company consistently raised prices over the past two years as demand climbed until October.
Citi analyst Jeff Chung said the first Tesla price cuts “created a negative spillover effect where a lot of China EV brands’ order backlog has suffered significant order cancellations” after checking with dealerships.
Several months later, it seems Chung’s research has some truth to it as leading Chinese EV maker Xpeng revealed several of its models are in line for price cuts on its official WeChat account.
Xpeng is slashing prices by up to $5,300, including its best-selling P7 sedan, which will start nearly 13% lower at 209,900 yuan ($31,000). Prices of the P5 sedan (now $23,180) and G31 SUV (currently $22,000) were also lowered significantly starting Tuesday.
The company said it would offer recent buyers (before the price cuts) free extended maintenance as compensation.
Price cuts for Xpeng are the last thing the EV maker needs. The company is bleeding money as losses widened to $330 million in the third quarter, with vehicle margins also slipping due to higher input costs.
Tesla slashing prices in China will make it challenging for companies like Xpeng and Nio, which are still trying to turn a profit.
The price cuts are good for buyers, but a pricing war with Tesla is not ideal for EV manufacturers, especially those without an established steady cash flow. We’ll keep a close eye on the Chinese EV market to see how the price cuts play out; stay tuned for more.