Tesla raises car prices worldwide, with the biggest increase in China

Hong Kong (CNN) Tesla has raised prices in its most important electric vehicle markets, including China and the United States, reversing a series of recent price cuts that pushed the company’s profit margin to the lowest since 2020 and triggered a price war.

The U.S. automaker raised prices for its Model Y SUV and Model 3 sedan by 2,000 yuan ($289) in China, its biggest overseas market, according to the company’s website on Tuesday.

Model Y and Model 3 start nows at 263,900 yuan ($38,179) and 231,900 yuan ($33,550) respectively. But they are still cheaper than they were at the start of the year due to several rounds of substantial reductions.

The same models, which account for the majority of Tesla sales, have also become more expensive in the United States, with the Model Y starting at $47,240 and the Model 3 at $40,240. But the $250 increase was lower than China’s.

You’re here (TSLA) also increased the prices of the Model 3 and Model Y by approximately $222 in Canada and $269 in Japan, respectively.

The increases were the second time Tesla has adjusted prices upward in a short time. Late last month, Tesla raised the prices of its premium vehicles: Model S and Model X by $2,500 in the United States. But those vehicles only accounted for a tiny fraction of its total sales, 2.5%, in the first quarter.

The recent series of price adjustments reversed a series of significant price cuts from Tesla that were intended to stimulate demand. Last month, Tesla CEO Elon Musk confirmed the company’s pricing strategy during an earnings call, hinting at further price cuts to boost sales volumes.

But analysts said the recent price increases had the same goal of fueling consumer demand.

Tesla may be trying to “reverse customer expectations for further price cuts” to prevent customers from adopting a new wait-and-see strategy, Citi analysts said Tuesday.

He may also want to “test the elasticity of demand given that repeated price declines could lead to impaired efficiency in increasing sales volume.”

Until recently, Tesla had cut prices aggressively to support demand amid growth. competition from other electric vehicle manufacturers.

In the United States, the company had cut prices six times this year before the recent increases.

In China, the world’s largest market for electric vehicles, Tesla led several rounds of cuts between October and January after losing market share to rivals, such as Warren Buffett, backed by BYD (I WILL). The cuts have sparked a price war in the country, with dozens of automakers following suit offering deep discounts.

According to the most recent statistics from the China Passenger Car Association, Tesla’s sales of its Chinese-made vehicles jumped 35% in March to more than 88,000 units. But it still lagged behind BYD, which has sold more than 100,000 pure battery electric vehicles.

Price cuts around the world have boosted Tesla’s sales, but also reduced its net income and profit margins. In the first quarter, the company’s revenue rose 24%, but its gross profit margin fell to 19.3%, the lowest since the end of 2020. Its net profit also fell 24% from one year ago.

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