Tesla Inc (NASDAQ:TSLA) is making its vehicles more price competitive to gain a bigger chunk of the Chinese EV market, if reports are to be believed.

What Happened: Tesla is planning to produce a third EV model from the Shanghai Giga in 2022, with the price point estimated between 160,000 yuan ($24,700) and 200,000 yuan ($31,000), local Chinese media reported. The new car project was initiated in September 2020 and product validation is expected to be completed in March, the report said.

Tesla currently sells Model 3 vehicles in China and it has begun accepting orders for made-in-China Model Y vehicles.

Related Link: Why Tesla Is Opposing South Korea's Proposed Green Energy Vehicle Policy

The new sedan, according to the report, is likely to be a two-seater with a body chassis similar to Model 3.

Tesla's cheapest car is the China-made Model 3, which is armed with a lithium iron phosphate battery. It's priced around 249,900 yuan ($38,500).

Why It's Important: With the nimble Chinese EV startups such as as Xpeng Inc – ADR (NYSE:XPEV) and Nio Inc – ADR (NYSE:NIO) breathing down the neck of Tesla, competitive pricing is one way of making deeper inroads into the local market.

Nio currently sells at the high-end, while Xpeng caters to the low- and mid-sized market. Speculation is rife that Nio may also be looking to enter the low-end market, although the company has not confirmed the same.