Xpeng sparks a price war and lowers prices to compete with Tesla

Chinese manufacturer of electric vehicles Xpeng announced on Tuesday that it would reduce prices on some of its most popular models. The move comes after that Tesla and others in the region have implemented similar price cuts, leading to a potentially competitive price war in China.

Xpeng cuts prices in China and joins Tesla

earlier this month, Tesla cut Model 3 and Model Y prices in China by as much as $7,000, the second drop in recent months.

The price cuts and short delivery time (one to four weeks) for Tesla models in China suggest a demand problem could be in the works. Price cuts are not typical for Tesla. The company has consistently increased prices over the past two years as demand surged through October.

Citi analyst Jeff Chung said First Tesla price cuts “Created a negative spillover effect, with the backlog of many Chinese EV brands suffering from significant order cancellations,” after inquiring with dealers.

A few months later, Chung’s research appears to have some truth when leading Chinese EV maker Xpeng revealed that several of its models are up for price drops on its official WeChat account.

Xpeng is slashing prices by as much as $5,300, including its best-selling P7 sedan, which will start nearly 13% lower at 209,900 yuan ($31,000). Prices of the P5 sedan (now $23,180) and G31 SUV (currently $22,000) were also significantly reduced starting Tuesday.

The company said it would offer free extended maintenance to recent buyers (before the price cuts) as compensation.

Electrek’s take

Xpeng price cuts are the last thing the EV maker needs. The company is bleeding money as losses widened to $330 million third quarterwith vehicle margins also falling due to higher input costs.

Tesla’s drastic price cuts in China will challenge companies like Xpeng and Nio still trying to turn a profit.

The price cuts are good for buyers, but a price war with Tesla isn’t ideal for electric vehicle makers, especially those without an established steady cash flow. We will be closely monitoring the Chinese EV market to see how the price cuts play out; stay tuned for more

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