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Tesla is facing tough competition in the EV game
01:46 - Source: CNN
Hong Kong CNN  — 

Tesla has slashed car prices in China for the second time in less than three months, in an effort to boost sales amidst slowing demand in the world’s largest car market.

The electric vehicle maker cut prices for all versions of its China-made Model 3 and Model Y on Friday, according to its website.

The starting price for Model 3 has been reduced by 13.5% to 229,900 yuan ($33,515), while the starting price for Model Y has been slashed by 10% to 259,900 yuan ($37,889), according to CNN calculations.

This is the second price cut since October 24, when Tesla (TSLA) reduced the prices of Model 3 and Model Y by as much as 9.4%. Previously, Tesla (TSLA) had increased prices by several times in the past two years.

“Tesla’s price cuts are backed by innumerable engineering innovations,” said Grace Tao, Tesla’s vice president for external relations in China, on her Weibo account on Friday. “[We are] responding to the country’s call with practical actions to promote economic development and release the potential of domestic demand.”

The discount comes at a time when the American electric vehicles maker is struggling to maintain its sales in China, its biggest international market.

In December, Tesla’s Shanghai factory delivered 55,796 vehicles, down 44% from November, according to figures released by the China Passenger Car Association on Thursday.

Overall sales in December reported by automakers fell 4% from the same month a year ago, as the world’s second largest economy slows to the weakest pace in decades.

Tesla’s price cuts come days after Beijing ended a 13-year-long subsidy for electric vehicle purchases on December 31, a move that is expected to put further pressure on car demand.

The Chinese government had planned to phase out its costly EV subsidy program by the end of 2020, but extended it during the pandemic to avert a sharp economic slowdown.

The company has been struggling outside China as well. Last year, Tesla produced more cars than it delivered, which means its inventory has increased.

On Tuesday, Tesla’s stock on Wall Street had its worst day in two years, dragged down by weaker-than-expected sales data globally. The company’s shares ended 2022 down 65%, greatly cutting into CEO Elon Musk’s net worth.

“The major worry now for Tesla is that the demand story especially out of China is showing heavy cracks in the armor,” said analysts from Wedbush Securities earlier this week.

EV competition is also increasing domestically in China, with Nio, BYD, Xpeng, and other brands “fighting for a smaller pie,” they said.

“A potential pricing war” could take place to gain market share, they added.

CNN’s Chris Isidore and David Goldman contributed to the article.