EV leader Tesla seems to be under pressure in two of the world's major automotive markets. The company is said to reduce component procurement in the US due to decreasing sales. In China, Tesla has ignited another price war to maintain its market share.
The EV maker's Model 3 and Model Y are eligible for the full US$7500 tax credits offered by the Inflation Reduction Act (IRA). As a result, Model Y has become the best-selling car model worldwide.
However, Tesla seems to have cut component procurement in the US for the third quarter of 2023, according to supply chain sources. The inflation caused by interest rates hike has impacted consumers' willingness to buy, forcing Tesla to adjust.
Sources said whether the impact will last until the fourth quarter of this year remains to be seen.
The EV tax credits the IRA provides are based on the proportion of US-made content. Model 3 and Model Y are eligible for the full credits while using LFP batteries from China-based CATL. Tesla likely has adjusted the content of battery assembly to meet the first-phase requirements set by IRA.
Media reports said Tesla probably will no longer be eligible for the full credits by the end of 2023 because the US government plans to raise the proportion of locally-made battery components and materials in 2024.
On the other hand, China has seen another unexpected price war in the third quarter of this year after the cut-throat competition in the first half. Some carmakers who refused to lower car prices to protect their profits have been forced to follow suit.
The recent price war in China focuses on the rivalry among EVs instead of the competition between EVs and internal combustion engine cars that happened earlier. The situation shows that EVs keep taking ICE vehicles' market share and how intense China's domestic competition is.
Tesla recently cut its vehicle prices again in China. Now the long-range Model Y is priced at about CNY300,000 (US$41,697) and the Model 3 is close to CNY200,000. The move has challenged many China-made vehicles that already have a lower price tag. Some Chinese automakers had no choice but to set the prices even lower. Consumers may delay their purchase to see if there is more discount.
