Tesla Inc. has reportedly reduced prices on two models in China, where it faces stiff competition from rivals such as BYD and is grappling with a continued difficult economic backdrop.
Tesla
TSLA,
cut starting prices on its Model 3 sedan by 5.9% and its Model Y sport-utility vehicle to 2.8%, according to reports Friday from Reuters, Bloomberg News and social-media accounts tracking the automaker.
China’s economy has struggled to fully get back on its feet after the global pandemic, with consumers slow to spend even amid government stimulus efforts. Official data released Friday showed consumer prices dropping 0.3% in December for a third straight month of declines.
Shares of Tesla are down over 8% so far this year — the stock has seen just one positive session since Dec. 28. Those losses come as the automaker reported forecast-beating fourth-quarter deliveries at the start of the month, but was knocked off its pedestal as the world’s leading EV seller by Berkshire Hathaway-backed BYD
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China’s EV market is largely dominated by local companies, with Tesla not only facing BYD , but Li Auto
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Nio
NIO,
and Xpeng
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as well.
Separately Tesla appears to have also been dragged into the Middle East conflict, with media reports saying the EV maker will halt the majority of its auto production near Berlin for two weeks due to “a lack of components.”
“The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope are also having an impact on production in Grünheide,” Tesla said in a statement on Thursday, according to Reuters and other media outlets.
The Red Sea is a crucial shipping avenue for cargo travel through the Suez Canal, with some $1 trillion in goods estimated to pass through it each year.
Many shipping companies have been forced to reroute due to ongoing attacks by Yemen’s Houthi rebels that were launched after the start of the Israel-Hamas war in October. The alternate route is longer and often incurs more costs for companies involved, while global shipping rates have been spiking due to those attacks.
MarketWatch has reached out to Tesla for comment.
Read: U.S., British launch massive retaliatory strike against Iranian-backed Houthis in Yemen
