Tesla Cuts Model 3 Price in China Amid Intensifying EV Price War

TLDRs;

• Tesla cut the price of its long-range Model 3 in China by nearly 4%, starting at 259,500 yuan.
• The company is offering incentives, including insurance subsidies and five-year interest-free loans, to boost sales.
• Tesla’s market share in China has plunged from 16% in 2020 to just 3.2% this year.
• Domestic rivals like BYD, Geely, XPeng, and Xiaomi are outpacing Tesla with cheaper prices and rapid delivery growth.

Tesla has announced a price reduction for its latest long-range Model 3 sedan in China, just days before customer deliveries are scheduled to begin.

The electric vehicle (EV), manufactured in Shanghai and boasting an impressive 830-kilometer driving range, will now retail starting at 259,500 yuan (US$36,400). This represents a nearly 4% cut, or about 10,000 yuan (US$1,402), from the previously announced price.

The timing of the cut highlights the urgency Tesla faces as competition in the world’s largest EV market heats up. Alongside the price reduction, Tesla is sweetening the deal for Chinese buyers with additional perks. Customers can now access an 8,000 yuan (US$1,122) insurance subsidy and a five-year, interest-free loan option, which could save buyers up to 20,000 yuan overall.

Competition Puts Pressure on Tesla Margins

Tesla’s decision is seen as a response to a fierce price war that has gripped China’s EV market. Over the past two years, average car prices in China have fallen by 19%, with electric cars now selling for less than gasoline-powered vehicles, an unprecedented reversal compared to five years ago.

Industry leader BYD, which has outpaced Tesla in sales volume, reported a 30% decline in second-quarter profits despite growing delivery numbers. The company attributed the drop directly to intensified price competition. Other domestic players, such as Geely and XPeng, have also been aggressively cutting prices while expanding market share.

Tesla’s modest 4% reduction, when compared to the steeper cuts made by local rivals, underscores the company’s challenge of maintaining its premium image while staying competitive in a rapidly shifting market.

Tesla’s Market Share Shrinks in China

According to data from the China Passenger Car Association, Tesla’s share of the Chinese EV market has collapsed to 3.2% as of June 2025. This marks a dramatic fall from the 16% share it commanded in 2020.

The decline highlights the rise of domestic manufacturers who have been quick to adapt to local demand with affordable models, advanced technology, and flexible financing options.

Recent figures show Tesla slipping to fourth place in deliveries, with a 6.5% decline year-over-year. Meanwhile, competitors have surged, BYD deliveries rose nearly 20%, Geely’s deliveries jumped 283%, and XPeng achieved over 220% growth. Even new entrants like Xiaomi have gained traction, with its SU7 sedan racking up 240,000 orders and delivering 25,000 units in June alone.

Tesla Expands Lineup with Model Y Variant

Despite the pressures, Tesla is not backing away from its ambitions in China. Alongside the updated Model 3, the company is preparing to roll out a six-seat version of its popular Model Y SUV, also manufactured in Shanghai. Deliveries are expected to start this month, reflecting Tesla’s strategy to broaden its product range to appeal to a wider audience.

While Tesla insists its pricing adjustments are tied to production costs, analysts see the moves as a clear acknowledgment of China’s hyper-competitive EV landscape.

Incentives like insurance subsidies and interest-free loans suggest the company is willing to sacrifice margins to sustain relevance in a market that is increasingly dominated by homegrown automakers.

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