The string of price cuts Tesla Inc (NASDAQ: TSLA) has been announcing its Model 3 vehicles in China, since the end of last year it may soon come to an end.
What happened: With Tesla’s localization fee, or the proportion of parts made in China, having reached its target, the electric vehicle giant is unlikely to cut prices in the near future, said Chinese state news agency Yicai Media, citing Tao Lin, vice Tesla President in China President.
The price of EVs depends largely on the price of raw materials and components, and if they go up, the price increases for Tesla EVs cannot be ruled out, Lin said.
Since Tesla started making Model 3 vehicles in China, the company has made five price cuts between October 2019 and October this year, the report said.
This dropped the price of Model 3 vehicles from 355,800 yuan ($ 54,4744) to 249,900 yuan ($ 38,260) in the country.
Related link: Why Tesla is unlikely to buy a permanent traditional car maker
With the cost of manufacturing an EV Model 3 in China reaching around 200,000 yuan (US $ 30,620), the gross margin of EVs made in China is estimated at around 30%, which is greater than that obtained with the US-made EVs, the report said.
Click here to check Benzinga’s EV Hub for the latest news on electric vehicles.
Because it’s important: China, according to analysts, is the key to Tesla’s growth thesis. After the launch of Shanghai Gigafactory, the company made strong inroads into China’s EV market.
Tesla was also able to keep out local competitors, such as Nio Inc – ADR (NYSE: NIO), and Xpeng Inc – ADR (NYSE: XPEV).
The lack of price influence could put Tesla at a disadvantage, especially as Chinese EV makers came up with guns drawn to face its foreign rival.
Related link: Analyst says Tesla’s $ 5 billion share sale is a smart strategic move
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.