Tesla Looks To Lure China Buyers With Another $860 Discount For Inventory Cars: What Investors Should Know

Zinger Key Points
  • Tesla just reported record sales in China despite economic and geopolitical risks.
  • The EV maker just announced its third downward price adjustment, apparently in a sign that demand may be slowing in the country.

Tesla Inc. TSLA is handing out further incentives to China buyers as the country grapples with the impact of on-and-off recurrences of COVID-19.

What Happened: Tesla’s China customers who opt to buy an inventory car would receive a discount of 6,000 yen ($860), Reuters reported, citing a company representative.

The latest price moves come after a price reduction of up to 9% announced by Tesla in late October. The company followed it up with another price adjustment in early November when it announced a 4,000-yuan insurance subsidy reduction.

See Also: Best China Stocks

Tesla and most of its Chinese rivals follow a build-to-order model. So, only when orders are canceled or if the companies overproduce, they will be left with unsold inventories, CnEVPost reported.

Why It’s Important: A Reuters report said this week, citing sources, that Tesla is reducing the production of Model Y vehicles at Giga Shanghai plant by 20% in December. This was later denied by the company.

The successive price cuts, however, lent credence to the theory that demand might be slowing in China. Piper Sandler analyst Alexander Potter said in a recent note that he expects further price cuts by Tesla to make its vehicles affordable.

He sounded out the possibility of the company running out of buyers in the $50,000+ price points amid the shaky macroeconomic situation and the ongoing COVID-19 disruptions.

Tesla closed Tuesday's session 1.44% lower at $179.82, according to Benzinga Pro data.

See also: Elon Musk's Call For 'Epic' Q4 At Risk As Tesla Reportedly Trims China-Made Model Y Production In Dec By 20%

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