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Tesla (TSLA) pulls demand levers in China, launches referral program and cuts prices

Tesla has decided to pull on demand levers in China with the launch of a new referral program in the market and cutting prices on Model 3 and Model Y. The TSLA Stock price is down in pre-market.

Over the last few months, there have been increased concerns about softening of demand for Tesla vehicles.

It was enough for CEO Elon Musk to address it during the conference call following the release of Tesla’s Q3 2022 financial results.

The CEO reiterated that “Tesla doesn’t have a demand issue”:

I can’t emphasize enough, we have excellent demand for Q4, and we expect to sell every car that we make for as far in the future as we can see.

In terms of demand softening for Tesla, we reported earlier this month that Tesla’s demand shouldn’t be seen as a concern until Tesla starts pulling on some “demand levers” – meaning that the automaker takes some action to actually create some demand.

To be sure Tesla has a full quiver of such levers. One example is that Tesla recently announced new colors out of its German factory. Those cars are now sold out for months longer than previous colors, even with a €3200 premium.

Tesla is pulling demand levers in China

For the better part of the last two years, Tesla has been coasting on the demand front and didn’t do anything to encourage it.

In fact, Tesla did the opposite by continuously increasing prices throughout its lineup and even stopped taking orders on some models because its backlog was getting too big.

Now we are seeing the tide changing for the first time in two years.

One of the biggest demand levers you can pull is reducing prices, and that’s exactly what the automaker is doing in China.

Today, Tesla reduced the starting price of its Model 3 built in China to 265,900 yuan (~$36,800) from 279,900 yuan. The Model Y SUV in China also saw a price reduction into the Chinese subsidy range to 299,988 yuan (288,900 after subsidy, ~ $40k USD) from 316,900 yuan. That subsidy will last until the end of the year and sales tax abatement will continue into 2023.

Furthermore, Tesla has pulled another demand lever in launching a new referral program in China.

We have been reporting for a while that Tesla has been working on a new referral program for vehicle owners after shutting it down completely last year. Last week, we reported on how Tesla should be launching it soon based on some new code in the Tesla mobile app.

Now Tesla has launched a version of the new referral program in China.

The automaker is calling it the ‘”Treasure Chest” Points Rewards’ program. Like the previous referral program, Tesla owners can get rewards if new buyers order through their referral links. The new buyers also get rewards through buying through these new referral links shared through the Tesla app.

The only difference is that instead of directly receiving awards, like free Supercharging miles, both the Tesla owner and the person who made the referral receive “points,” which can later be exchanged for awards like in-vehicle software upgrades, Tesla accessories, or free Supercharging miles.

The points also enter Tesla owners into quarterly and annual raffles.

Here are the prizes for the first quarter 2023 raffle:

  • Tesla Texas Belt Buckle, worth 998 yuan, 89 copies in total
  • Tesla Model S stroller, valued at $5,999, five copies
  • The third-generation home charging service package (national standard 40 meters installation service), worth 8,000 yuan, a total of five copies
  • A 24-month right to use the in-vehicle software upgrade package “Fully Autonomous Driving Capability,” worth about 33,400 yuan, a total of one copy

And here are the prizes for Tesla’s first “annual sweepstakes”:

  • Tesla Shanghai Gigafactory VIP Visit Invitation Letter (with two immediate family members), worth about 5,000 yuan/person, five copies in total
  • The super charging mileage is 50,000 kilometers, worth about 24,600 yuan, a total of two copies
  • Three-year right to use new items in the Tesla boutique, up to a value of up to $45,000, one in total
  • Model 3 rear-wheel drive version or Model Y rear-wheel drive version of the vehicle for one year, worth about 47,500 yuan, a total of one

It is too early to see just how popular these demand levers are, though we’re already hearing that the increased demand initially brought down Tesla’s Chinese ordering site.

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