Tesla reduces Model 3 price in China to regain incentive access, now just $38,500

Tesla has officially reduced the price of the made-in-China Model 3 in order to regain access to local incentive access.

The electric car now starts at just the equivalent of $38,500 in China.

As we reported last week, China announced that it cut subsidies for electric cars by 10% this year, followed by further reductions in the next two years. The reduced subsidies are now only available to passenger cars costing less than 300,000 yuan ($42,400).

At that time, Tesla’s China-made Model 3 sedan was priced at 323,800 yuan ($45,800).

During a conference call following the release of Tesla’s Q1 2020 results, CEO Elon Musk confirmed that Tesla plans to adjust pricing to regain access to the incentive:

“We are making rapid progress on lowering the production costs in China. And we’re actually excited to announce on this call that we will be reducing the price of the standard range Model 3 basically tomorrow, China time. So the day after tomorrow, California time, but tomorrow, China time. And there will be a price below the subsidy limit. And we feel confident that it will still be a vehicle that delivers a good gross margin.”

Today, Tesla made good on Musk’s statement and updated its Model 3 configurator for the Chinese market with a new price:

Tesla reduced the price to ¥291,800 yuan, which is equivalent to $41,300 USD. That’s getting pretty close to the price in the US: $39,990.

After incentives, the made-in-China Model 3 now costs only ¥271,550 yuan or $38,450 USD.

The price is going to enable Tesla to maintain its strong demand in the country, which is especially important right now with the Fremont factory being forced to shut down and Tesla only producing cars in China.

Prior to the change in the government’s EV incentive program, Tesla’s sales have been doing well in the country with a new record high during the pandemic.

In March, Tesla’s sales represented 25% of China’s EV sales.