Tesla price war leads to Chinese EV makers losing profits

Tesla — On Thursday, Tesla received some good news as shares in the company’s Chinese rivals dropped.

Xpeng declined by 8% in Hong Kong, while Nio also fell by 5.6%.

Two others, Li Auto and Leapmotor, also dropped by 4.2% and by 2.4%, respectively.

Additionally, BYD, the world’s largest plug-in hybrid EVs and battery EVs seller, also witnessed a 1% plunge in Hong Kong.

Meanwhile, its Shenzhen-listed stock reported a bigger loss of 2.3%.


The drop in shares came after Tesla CEO Elon Musk revealed the company would continue cutting prices.

The decision is meant to boost demand for electric cars as the market grows increasingly competitive.

During an earnings call with analysts on Wednesday, Musk released a statement, saying:

“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin.”

“We do believe… that it’s better to ship a large number of cars at a lower margin, and subsequently, harvest that margin in the future as we perfect autonomy.

Price cuts

In October, Tesla started cutting prices in China, which is home to the world’s largest EV market.

The price cut decision came after losing market share to competitors like the Warren Buffet-backed BYD.

Another price cut came in January 2023 for Tesla’s China-made Model 3 and Model Y.

The slashed prices extended across markets worldwide to bolster demand while challenges from other EV makers increased.

For example, the United States witnessed Tesla reducing its prices for the sixth time in 2023 ahead of its first-quarter earnings.


According to data from the China Passenger Car Association, sales of Tesla’s China-made cars increased by 10% from the same period in January compared to 2022.

Meanwhile, most of the Chinese rivals posted steep declines in sales.

Leapmotor and Xpeng’s January sales took a massive hit, plunging by 86% and 60%, respectively.

Furthermore, Tesla’s decision to slash prices prompted a price war in China.

After Elon Musk’s company made the first move, several Chinese car manufacturers followed a similar path.

Companies started cutting their prices or offered discounts, including:

  • Xpeng
  • Leapmotor
  • BYD
  • Huawei’s EV unit

In February, a Huawei EV salesperson spoke with state-owned Economic Observer, saying:

“Tesla has cut prices a lot. If we don’t cut prices, we really can’t survive.”

According to recent data from the CCPA, Tesla’s sales of China-made vehicles went up by 35% in March, leading to more than 88,000 units.

However, it still fell behind BYD, as the company sold more than 100,000 pure battery EVs.

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The price wars

Tesla’s decision to cut prices created a domino effect that led to a price war and an impact on the company’s sales and profits.

So far in April, the company earned $2.9 billion, which, excluding special items, is down by 22% from 2022.

The lower prices also prompted revenue to a drop of $1.3 billion compared to the fourth quarter, even with record deliveries.

As a result, the company is faced with tighter profit margins.

Other companies like Ford have also cut prices, especially for its key EV, the Mustang Mach-E.

Over the call with investors, CEO Elon Musk said the company is facing headwinds from broader economic conditions.

“It is worth pointing out that the current macro environment remains uncertain,” said Musk.

“I think people already know [that], especially with large purchases such as cars.”


On Thursday, shares of European car makers also took a hit as people grew concerned about pricing pressure.

French company Renault dropped by 6.5% despite the company reporting strong sales and higher prices over the first quarter.

Stellantis, the group that came from a merger between Fiat Chrysler and PSA Group dropped by 4.8%.

Mercedes-Benz Group and BMW fell around 2.8%.

Meanwhile, Volkswagen, Europe’s most successful car maker, took a hit of 1.9%.