Elon Musk’s gambit to lower Tesla prices in China may have backfired as angry owners protested the new vehicle’s price over the weekend.
Feeling the heat from local rival BYD, Tesla lowered the entry point for its two main model lines on Friday to lure customers back to showrooms and build up its low order book.
The move worked, but not entirely for the reasons he wanted.
A group of angry Tesla customers reportedly showed up at several Tesla showrooms across the country demanding some form of compensation for buying a new car at an older price.
One protest even appears to have been organized by employees of Tesla’s biggest competitor.
A man who identified himself on the Chinese social media site Weibo as “Wang Xingguang” admitted to participating in the protest at a Tesla dealership in Xi’an, Shaanxi province. He claimed he was there in a personal capacity, not a BYD employee.
Believe it or not, his confession only encouraged more happiness in the Tesla community, because he opened it there on behalf of his wife. A Tesla customer herself, she prefers Musk’s car to the one her husband’s employer makes.
“I am defending the rights and interests of my family, which is a personal act and has nothing to do with the company I work for,” he posted on Weibo. “As a member of the car owner’s family, can’t I protect my rights?”
With legacy automakers still turning their attention to the bread-and-butter combustion engine business to destroy less profitable EV models, China’s BYD has become Tesla’s biggest competitor.
The automaker is not as well-known internationally as other major competitors like General Motors, Ford or Volkswagen, as BYD has only started selling vehicles outside of China.
BYD’s vehicle sales in China are double those of Tesla and have been for the past few years, although earnings per unit are nowhere near the same due to lower average selling prices.
Why is Tesla lowering prices?
The price cut, Tesla’s second since late October, has been the subject of intense debate amid ongoing fears that Musk’s incredible growth story is starting to take on water as production begins to outstrip demand.
The last time Musk lowered the starting price of a vehicle, the stimulatory effect was short-lived.
While weekly unit sales tripled to 16,000 at the end of November, they dropped to just 4,338 in the new year.
For the moment, fresh cuts seem to have spurred some good demand in the world’s largest EV market, but only for certain Y crossovers.
The waiting time for the entry version of the single motor and dual motor variants of the maximum range has now been increased to 2-5 weeks.
Every other Chinese-made model continues to feature the same 1-4 week waiting time as before. In the past, Chinese customers might not receive a new Tesla vehicle for months.
News of a budding price war sent the Chinese EV maker’s shares tumbling on Friday and even pushed Tesla shares to a two-year low.
Bulls say Tesla’s automotive gross margin of nearly 30% gives it longer-lasting price war durability than less profitable rivals including BYD.
He cited comments for example from Tesla official Grace Tao, who posted on her Weibo account on Friday that the cuts will not reduce margins because they can be offset by “many engineering innovations.”
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