Tesla Keeps Raising Prices for U.S. But Not China

Matt Posky
by Matt Posky
tesla keeps raising prices for u s but not china

This year has already seen price increases across the board, thanks largely to the supply crisis created in the wake of our response to the pandemic. As it turns out, shutting down the global economy wasn’t ideal for maintaining business as usual and nobody in charge seems all that interested in returning things to normal. Automotive prices have become particularly troublesome, as manufacturing costs have risen and a deficit of product has made this a seller’s market.

Tesla has been raising rates all year, particularly on its higher-volume models. By June, price bumps had become so common with the brand that CEO Elon Musk had to address the matter. He blamed industry-wide supply chain pressures, noting that raw materials had become particularly costly. While a totally rational explanation, there are problems with it when you realize those end-of-line price hikes aren’t being extended to China.

Long Range, dual-motor variants of the Model Y and Model 3 just had $1,000 added to their MSRP — leaving the crossover to start at $53,990, with the sedan coming in at $49,990. While U.S. customers do have access to a cheaper Model 3, that’s not the case for the Model Y and the car has seen its sticker increase by $4,000 since February. However, this pertains specifically to the U.S. market, as China has not experienced a similar uptick in vehicle pricing.

There is a laundry list of reasons for this. Tesla is focused on growth in China and recently completed Gigafactory 3 in Shanghai where it can manufacturer the Model 3 and Y for less money. It also has substantially more direct competition there and has endeavored to keep prices down to maintain a competitive edge. China accounts for almost half of all EVs sold on planet Earth, whereas the United States represents around 17 percent of the total market.

While a recent analysis from Reuters confirmed that prices have been raised in China, the frequency and amount aren’t equitable to what’s currently being endured by the United States.

From Reuters:

Tesla raised prices for Model Y Long Range at least six times in the United States this year, bumping by $5,500 [since Janurary] to $53,990. In China, the world’s most valuable carmaker raised prices of the Model Y SUV and Model 3 sedan only once this year.

The Model Y version a price tag [sic] of 276,000 yuan ($42,394). The company also has launched promotional campaigns in China such as loan offers.

“I think Tesla is looking to be as competitive as it can be in China. Lower prices will be a part of that aggressive market positioning,” Roth Capital Partners analyst Craig Irwin said. “There is a very large difference in battery prices in the U.S. and China, as well as local vehicle manufacturing costs.”

That’s true of most automakers. Vehicles are simply cheaper to produce in China and companies frequently equip them with hardware that’s a little easier on the corporate pocketbook. Some Chinese-made Tesla products use a different (see: cheaper) battery chemistry from CATL and have been alleged to offer lesser fit and finish than their U.S. counterparts. But the company’s quality control has always been a little erratic and it has de-contented Western models in the past by removing some of the sensing equipment used for the Autopilot suite.

Granted, pricing does come down in practically every market once you’ve accounted for government subsidies. But it still feels like other markets are taking the hit so Tesla can keep plugging away at making sure it’s a success in China.

On the one hand, it’s difficult to chide Tesla for engaging in the same business practices we’ve seen legacy automakers adhere to for years. Everyone wants a shot at China. But it’s different when the automaker’s entire lineup benefits heavily from the current regulatory environment and the business is propped up by government subsidies. Though it may be better to take that up with the people who enabled it, rather than those who have managed to exploit it.

We’re not really sure what’s fair or prudent here. While China is a massive country with an assumed growth potential that makes investors salivate, Tesla’s share of the market declined from 18 percent in 2020 to 11 percent in the second quarter of 2021. Despite losing some ground in the United States during the same timeframe, Teslas still represent the overwhelming majority of domestic EV sales.

[Image: Image: Helloabc/Shutterstock]

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  • Tsarcasm Tsarcasm on Jul 29, 2021

    All prices are up, the FED keeps printing money. It's called inflation.

  • Random1 Random1 on Jul 29, 2021

    I went to a Tesla showroom a couple of weeks ago, and the salesman was pretty candid saying "we expect to raise prices since we're expecting to get federal tax credits again". Not sure he's right (I do think Biden admin will expand the credits, esp since GM wants them too), but if they have demand without the $7500, they might as well try to grab some of it....

  • Denis Jeep have other cars?!?
  • Darren Mertz In 2000, after reading the glowing reviews from c/d in 1998, I decided that was the car for me (yep, it took me 2 years to make up my mind). I found a 1999 with 24k on the clock at a local Volvo dealership. I think the salesman was more impressed with it than I was. It was everything I had hoped for. Comfortable, stylish, roomy, refined, efficient, flexible, ... I can't think of more superlatives right now but there are likely more. I had that car until just last year at this time. A red light runner t-boned me and my partner who was in the passenger seat. The cops estimate the other driver hit us at about 50 mph - on a city street. My partner wasn't visibly injured (when the seat air bag went off it shoved him out of the way of the intruding car) but his hip was rather tweaked. My car, though, was gone. I cried like a baby when they towed it away. I ruminated for months trying to decide how to replace it. Luckily, we had my 1998 SAAB 9000 as a spare car to use. I decided early on that there would be no new car considered. I loathe touch screens. I'm also not a fan of climate control. Months went by. I decided to keep looking for another B5 Passat. As the author wrote, the B5.5 just looked 'over done'. October this past year I found my Cinderella slipper - an early 2001. Same silver color. Same black leather interior. Same 1.8T engine. Same 5 speed manual transmission. I was happier than a pig in sh!t. But a little sad also. I had replaced my baby. But life goes on. I drive it every day to work which takes me over some rather twisty freeway ramps. I love the light snarel as I charge up some steep hills on my way home. So, I'm a dyed-in-the-wool Passat guy.
  • Paul Mezhir As awful as the styling was on these cars, they were beautifully assembled and extremely well finished for the day. The doors closed solidly, the ride was extremely quiet and the absence of squeaks and rattles was commendable. As for styling? Everything's beautiful in it's own way.....except for the VI coupe....it's proportions were just odd: the passenger compartment and wheelbase seemed to be way too short, especially compared to the VI sedan. Even the short-lived Town Coupe had much better proportions. None of the fox-body Lincolns could compare to the beautiful proportions of the Mark V.....it was the epitome of long, low, sleek and elegant. The proportions were just about perfect from every angle.
  • ToolGuy Silhouetting yourself on a ridge like that is an excellent way to get yourself shot ( Skylining)."Don't you know there's a special military operation on?"
  • ToolGuy When Farley says “like the Millennium Falcon” he means "fully updatable" and "constantly improving" -- it's right there in the Car and Driver article (and makes perfect sense).