Tesla’s closest Chinese rival, Li Auto, slashes prices as EV discount war spreads to premium market

The Beijing-based carmaker said it would cut prices by between 18,000 yuan (US$2,485) and 30,000 yuan and improve its offerings for Chinese families
It is a sign that the EV ‘price war has spread to the premium segment’, says Eric Han, a senior manager at Suolei, an advisory firm in Shanghai

Electric & new energy vehicles

Daniel Renin Shanghai

Published: 1:29pm, 22 Apr 2024

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Li Auto, Tesla’s nearest rival in mainland China, reduced the price of all its vehicles by up to 5.7 per cent, just a day after the US carmaker offered discounts to local customers amid an escalating discount war.

The Beijing-based company announced on Monday morning that it would cut prices by between 18,000 yuan (US$2,485) and 30,000 yuan as a way of “focusing on customer value”. It said it is determined to keep improving its offerings for Chinese families such as its large vehicles fitted with household appliances.

On Monday, it cut the price of its Li Mega multipurpose minivan by 30,000 yuan, or 5.4 per cent, to 529,800 yuan. Launched in March this year, the fully-electric minivan described by its maker as being essentially a “mobile home” is designed to cater to the travel demands of wealthy families and is fitted with a refrigerator and a sofa.

The Li L7 Max sport-utility vehicle saw the steepest discount in percentage terms, with a price drop of 20,000 yuan, or 5.7 per cent, to 329,800 yuan.

“It is a fresh sign that the electric vehicle (EV) price war has spread to the premium segment now that Tesla and Li Auto, the two leaders, have joined the price competition,” said Eric Han, a senior manager at Suolei, an advisory firm in Shanghai. “Their pricing strategies are detrimental to small and unprofitable rivals whose profit margins will be squeezed further.”

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On Sunday, Tesla lowered prices of its Shanghai-made Model 3 and Model Y vehicles by more than 5 per cent, a move that came hot on the heels of price cuts it made in the US, its biggest market, on Friday.

Tesla is the front runner in China’s premium EV segment, handing more than 600,000 cars to mainland buyers last year, an increase of 37 per cent from 2022.

Last year, Li Auto delivered 376,030 vehicles to mainland Chinese motorists, a jump of 182 per cent over 2022. It trails only Tesla in the premium segment.

Both companies suffered a setback in the first quarter of 2024 as weak sentiment across the entire market dented deliveries.

Tesla’s mainland sales between January and March dropped 3.6 per cent from the fourth quarter of 2023 to 132,420 units.

Li Auto delivered 80,400 units, down 39 per cent from the previous quarter when it sold a record 131,805 vehicles to its domestic customers.

Across the mainland, electric car sales slumped 31 per cent quarter on quarter to 1.76 million units in the three months ending March 31, according to data compiled by the China Passenger Car Association (CPCA).

BYD, the world’s bestselling electric-car maker, fired the first salvo in a price war in February, slashing the prices of some budget models to lure young and low-income Chinese drivers.

On February 18, the Shenzhen-based company backed by Warren Buffett’s Berkshire Hathaway, launched a new version of its plug-in hybrid, the Qin Plus DM-i, with prices starting at 79,800 yuan, 20 per cent below the previous edition.

It has since slashed the prices of nearly all of its cars by 5 to 20 per cent.

Cui Dongshu, general secretary of the CPCA, said in February most carmakers were likely to continue offering discounts to retain their market share.