Tesla’s price cut to become the “fish” of Chinese electric car companies?

China’s electric car companies experienced a “shrink” of new energy vehicle subsidies in 2019 and faced Tesla’s cut in the price of the Chinese-made Model3 in 2020. Recently, Tesla announced that the price of the Model3 base car in China was reduced from 356,000 yuan (RMB, the same below) to 324,000 yuan, and after subtracting China’s new energy subsidies, the price was 299,000 yuan, falling below 300,000 yuan.

As soon as the news came out, the capital markets immediately reacted. The A-share market to BYD as the representative of some new energy vehiclestocks floating green, the U.S. stock market NIO also fell, Tesla shares rose.

According to statistics released by the China Association of Automobile Manufacturers, new energy vehicle production and sales in November 2019 were 110,000 and 95,000 units, respectively, down 36.9% and 43.7% year-on-year, respectively. Although new energy car production and sales grew by 3.6 per cent and 1.3 per cent respectively in the first 11 months of last year, it also bid farewell to previous surges.

In 2019, China’s new energy vehicle industry is undoubtedly a “big test.” Tesla has cut prices or become the “fish” of China’s electric car companies, activating the same industry.

From the market environment, from June 26 last year, the new energy vehicle subsidy policy to implement adjustment, local government subsidies eliminated, while the national subsidy standard slower by more than 50%. Although in line with market expectations, but in the short term car companies must survive the “weaning” after the pain period.

“Subsidies are accelerating the degreasing. Ren Zeping, chief economist of Evergrande Group and president of Evergrande Research Institute, pointed out that the financial subsidies for new energy vehicles have been significantly degenerated since 2017 and will continue to accelerate their withdrawal in 2019.

From the competitor’s point of view, Tesla’s Chinese plant in Shanghai broke ground on January 7, 2019, the domestic Model3 was officially delivered at the Shanghai plant on December 30, less than a year to complete the plant, mass production and delivery, and recently announced a heavy price reduction, Tesla’s “combination fist” in the Chinese market quickly and powerfully.

Liu Jiansen, a senior analyst at Market Research Institute Canalys, said the Chinese government’s various incentives and subsidies in the new energy vehicle industry have been effective in boosting the new energy market, but the reduction in subsidies and increased competition have made It a challenge for Chinese new energy vehicle manufacturers.

He noted that China’s new energy vehicle start-ups will come under pressure, while Tesla will face opportunities and benefit from the benefits of exemptvehicle vehicle purchase taxes for its products. In particular, the Tesla-made Model3 will come under increased pressure from China’s new energy vehicle companies as it has a price advantage.

Some observers also said that Tesla’s rapid development in the country, accelerated the reshuffle of the new energy vehicle industry, while under the leadership of Tesla, the domestic new energy vehicle industry is expected to significantly improve the technical level, thereby further reducing the cost of domestic new energy vehicles, accelerate the popularity of domestic new energy vehicles.

In addition, Tesla’s domestication and falling cost trend, will drive more domestic new energy vehicle industry chain enterprises or Tesla China partners’ rapid development, so the domestic new energy vehicle industry chain will also usher in a rare development opportunity.

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