Australia

Tesla cuts prices for Model s and Model Y in China. And in Australia …

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Tesla Model Y. Image: Riz Akhtar

Tesla has made significant progress this year after its major manufacturing centres came out of lockdowns and despite an increase in raw material costs and higher transportation costs.

Now it seems, that things are settling back down with Tesla announcing plans to reduce prices on all their EV models in China.

Tesla has cut prices on all their models by thousands of Australian dollars. This brings the base Telsa Model 3 RWD to 265,900 RMB or $57,982 AUD. It was initially reported on Tesla’s official Weibo social media account and then by Sawyer Merritt, a Tesla investor, on Twitter.

BREAKING: @Tesla has announced huge price decreases for all models in China. Base Model Y is now eligible for China's purchase subsidy. Amounts:

• Model 3 RWD: -$2,000 USD
• Model 3P: -$2,500 USD

• Model Y RWD: -$3,900 USD• Model Y LR: -$6,500 USD
• Model Y P: -$2,800 USD pic.twitter.com/rvQ3EF8Wk5

— Sawyer Merritt (@SawyerMerritt) October 24, 2022

This is down by over $3,000 on the previous post-subsidy price which hovered around $61,049 AUD with the current exchange rate.

Similarly, a new Tesla Model Y RWD is now the equivalent of $63,012 AUD after subsidies, down from $69,111 AUD. These are significant cuts across the range of Tesla’s EVs to allow for the Model Y RWD to be eligible for New Energy Vehicle (NEV) subsidies that end for Chinese customers at the end of this year.

This is also on the back of a ramp-up in Shanghai production capacity after Tesla’s Gigafactory had its upgrades. Last month, the factory produced over 80,000 EVs making it a new record.

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Image: Riz Akhtar

What does this mean for Australian order holders and would we be expecting to see a similar drop in prices in our local market anytime soon?

Prices in Australia to remain at current levels

While Tesla has been looking at creating a greater demand in China and lowering prices there, it’s unlikely that the same will happen in Australia anytime soon.

One of the main drivers behind this is the high shipping and transportation costs to a “low volume” market like ours.

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Image: Riz Akhtar

With the prices of raw materials, transport and delivery costs remaining at elevated levels, Tesla has more of an incentive to sell more of their EVs where they produce them. With China being the largest producer and consumer of EVs globally, it makes sense for Tesla to sell more of them with lower logistics costs.

Australia still has a backlog of Model 3 orders running as far back as March this year. Some of those were placed at lower prices than what Tesla charges Australian customers today. Tesla is working through those orders for our market while maintaining an industry-leading automotive gross margin.

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Shanghai Gigafactory 3 body shop. Source: Tesla

Much of that is put back into R&D and expanding their production footprint to reach the production goal of 2 million units by the end of next year.

As more demand for logistics and other raw materials lowers over the coming months, we may see prices in Australia drop. That could be good news for those looking at a used EV too and help bring those elevated prices back to a healthier level.

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