Tesla Releases Cheaper Model Y in China

In a bid to address slumping sales in China, Tesla has releases a less expensive vehicle known as the Standard Range (SR) Model Y. With government subsidies, the SR Model Y starts at ¥276,000 ($42,589). Tesla’s website says that deliveries of this cheaper version of the Model Y will begin in August. The original Model Y cost ¥347,900 ($53,700), but the price reduction makes the SR version eligible for government subsidies for electric vehicles that cost less than ¥300,000.

 The Chinese government had originally planned to scrap the subsidies but changed its mind when COVID-19 made its appearance and sales of electric vehicles slumped across the board. Tesla faces competition from Chinese automakers like NIO and XPeng, though the Chinese companies’ home field advantage doesn’t necessarily make them immune to economics.

Tesla has especially faced public relations challenges in the Chinese market. Most recently, it had to issue a massive recall of vehicles to fix a problem with its Autopilot driver assist program. Customers have also complained about Tesla’s lack of quality customer service and protests included one woman who climbed on top of a Tesla vehicle that was on display at an auto show. Chinese bloggers say that Tesla threatened to sue them for what the company alleges are defamatory comments and Tesla is also fighting a legal battle with the Chinese news outlet PingWest. In that case, Tesla alleges that PingWest committed libel by claiming that Tesla makes use of “sweatshop” working conditions at Gigafactory Shanghai. The Chinese government has banned Tesla vehicle owners from parking the vehicles at government facilities due to concerns that their cameras could capture footage of sensitive activities.

Weak sales in China are a factor in Tesla’s slumping stock price after its growth in 2020 was enough for Elon Musk to briefly edge out aerospace rival Jeff Bezos on the top of the list of Earth’s wealthiest people. Tesla shares have dropped 9% of their value so far this year.

Even so, Tesla is unwilling to give up on an important market for electric vehicles. It recently opened a solar powered charging station in Tibet as a test run and floated the idea of building more in Asia as an investment in the infrastructure needed to support widespread adoption of electric vehicles and answer to the criticism that the majority of China’s energy production still relies on coal. Although it denies that the cameras are active on vehicles sold in China, it built a datacenter in China to address the concerns about espionage.

The weak sales and poor PR in China do not seem to have hurt it much in worldwide sales. In Q2 2021, it posted record-setting deliveries of 201,250 vehicles, many of them exported from Gigafactory Shanghai to the European market in lieu of the conclusion of the ongoing regulatory and legal wrangling that is holding up the opening of Gigafactory Berlin. Tesla had floated the idea of acquiring more land near Gigafactory Shanghai but has apparently put that on hold until it can resolve the PR issues and Chinese government’s concerns about espionage.