Following the news that Telsa will reduce the price of its Model 3 in China to ensure that it qualifies for subsidies in the world’s largest car market;

Calum MacRae, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view:

“Tesla was facing a substantial headwind in its plans to grow its sales in the crucial China market. In a move probably designed to favour indigenous manufacturers, China’s finance ministry decided to limit the availability of subsidies to vehicles costing less than ¥300,000 (US$42,357). This immediately placed Tesla’s Model 3 – its volume model and the basis of its strategy to grow sales in China – outside of the group as it was priced at ¥325,000.

“In response, Tesla has demonstrated its agility – and perhaps its industry leading margins – by announcing an immediate 10% price cut for its Model 3. Now its Standard Range Plus Model 3 will cost ¥271,550 after application of a ¥20,250 subsidy. It’s the second such price cut to the Model 3 in a matter of months with Tesla lopping 16% off the price of the car in early January.

“This latest move means that Tesla can now expect to maintain its impressive growth in China’s market. This growth saw Model 3 demand soar by 450% in March when it sold over 11,000 Model 3s. The Model 3 leads EV sales in China in the YTD, with over 16,500 sold, which is nearly double the volume of its nearest rival the BYD Qin.

“Tesla has demonstrated agility in a market that is crucial to its future success.”