Chinese electric vehicle maker Xpeng announced Tuesday it would cut prices on some of its most popular models. The move comes after Tesla and others in the region have implemented similar price drops, fueling what could be a competitive pricing war in China.
Xpeng cuts prices in China, joining Tesla
Earlier this month, Tesla slashed Model 3 and Model Y prices by up to $7,000 in China, the second cut in recent months.
The price cuts and a short delivery lead time (one to four weeks) for Tesla models in China suggest a demand problem could be in the works. Reducing prices is not typical for Tesla. The company consistently raised prices over the past two years as demand climbed until October.
Citi analyst Jeff Chung said the first Tesla price cuts “created a negative spillover effect where a lot of China EV brands’ order backlog has suffered significant order cancellations” after checking with dealerships.
Several months later, it seems Chung’s research has some truth to it as leading Chinese EV maker Xpeng revealed several of its models are in line for price cuts on its official WeChat account.
Xpeng is slashing prices by up to $5,300, including its best-selling P7 sedan, which will start nearly 13% lower at 209,900 yuan ($31,000). Prices of the P5 sedan (now $23,180) and G31 SUV (currently $22,000) were also lowered significantly starting Tuesday.
The company said it would offer recent buyers (before the price cuts) free extended maintenance as compensation.
Update: Xpeng says the new pricing adjustments affect the current G31, P5, and P7 EVs in China, effective January 17. The company noted the new pricing does not affect the G9.
A representative from the company tells us:
The pricing adjustment is part of our approach to making smart EVs accessible to more customers, a mission that we set at the beginning of the company’s inception.
Adding:
The move will increase the competitiveness of our current products, allowing a broader spectrum of users to experience the intelligent features, and creating a more favorable momentum ahead of our new product launches.
Top comment by Christopher
We're about to see an EV price war that will culminate in ICE price parity (and eventually some consolidation/bankruptcies among manufacturers who can't keep up)
Up to this point, the supply line has been far below demand. Now they are right next to each other, and price drops will convert EV profit margins to higher demand.
A vicious cycle will ensue as EV demand lowers ICE demand, and ICE loses economy of scale.
ICE losing economy of scale will mean prices for gas vehicles will increase, as legacy manufacturers bank on higher margins to offset lower volume as they transition to EVs.
EV prices will keep going down 📉 while ICE prices will go up 📈
In addition, Xpeng, states the company is striving to improve efficiency and reduce tech costs while focusing on the customer’s needs.
Electrek’s Take
Price cuts for Xpeng are the last thing the EV maker needs. The company is bleeding money as losses widened to $330 million in the third quarter, with vehicle margins also slipping due to higher input costs.
Tesla slashing prices in China will make it challenging for companies like Xpeng and Nio, which are still trying to turn a profit.
The price cuts are good for buyers, but falling prices are not ideal for EV manufacturers, especially those without an established steady cash flow. We’ll keep a close eye on the Chinese EV market to see how the price cuts play out; stay tuned for more.
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