Tesla’s Model Y Is 40% Cheaper in China Than in the US After Latest Price Cuts

Tesla today (Jan. 6) slashed prices of its Model 3 and Model Y electric cars in China for the second time in three months in a bid to boost demand amid falling sales. After the latest cuts, the entry-level Model Y is 43 percent cheaper than in the U.S., and the base Model 3 costs 30 percent less.

Tesla shares fell 3.5 percent in today’s pre-trading hours and is up 1 percent by mid-day. Shares fell 70% in 2022.

Tesla has lowered price of Model Y in China by 10 percent to a record low of 259,900 yuan ($37,875). In the U.S., the Model Y starts at $65,990 and is not eligible for electric vehicle tax credits under the Inflation Reduction Act. The entry-level Model Y available in China is a standard-range vehicle with rear-wheel drive, while the U.S. base model comes with a longer range and all-wheel drive.

The starting price for China-made Model 3 has dropped 14 percent to 229,900 yuan ($33,427), about 30 percent cheaper than in the U.S. Model 3, except for the most expensive Performance version, is eligible for $7,500 in federal tax rebates in the U.S.

All Tesla vehicles sold in China are locally manufactured at the company’s Shanghai Gigafactory, where labor and material costs are lower than the Fremont, Calif. factory, which supplies the U.S. market.

Tesla lowered the prices of Model 3 and Model Y in the U.S. by about $4,000 in early December. The discounts are smaller compared with price drops in China.

Today’s price cuts brought the starting price of Model 3 to the same level of the Han EV sedan made by BYD, Tesla’s largest competitor in China. Last year, BYD overtook Tesla as the world’s largest seller of electric vehicles, when including plug-in hybrid vehicles.