Price cuts have revived Tesla sales in China, but analysts, even adherents of its founder Elon Musk, warn that its efforts should not be short-term, or it risks being “eaten to dust” by very fast competitors in the country with the world’s largest market for electric vehicles. Meanwhile, Tesla’s January price cut immediately boosted Chinese sales by 18% compared to December. Analysts say Tesla’s big profits have allowed it to face a price war from competitors in China and beyond. But they note that Tesla is lagging behind when it comes to launching new models, improving navigation systems and adding luxury to interiors or white-gloved customer service — hallmarks of an expanding range of consumer preferences. cars.

“Tesla is facing a major challenge with a very limited product range,” said Cui Dongxu, general secretary of the China Association of Passenger Car Manufacturers. “The slow response to Chinese consumer preferences has led to a very passive approach, which is why we see Tesla only relying on a few tools, such as price cuts, to stay competitive.” Even its CEO and founder Elon Musk has acknowledged that China is a market where its automaker could face the toughest competition. Grace Tao, Tesla’s vice president of external communications for China, said earlier that the price cuts reflect engineering innovation and are in response to Beijing’s call to spur economic growth and consumption.

The China Automobile Manufacturers Association, for its part, expects electric and hybrid vehicle sales to grow by 35% in 2023 to 9 million vehicles, nearly 1/3 of China’s total new vehicle sales. And while Tesla has increased its sales in the country, which is also its second largest market, it has also lost share. From 15% in 2020, its share of the electricity market has fallen by a third to just 10% in 2022, according to official figures. Tesla offers two models in China, the Model 3 sedan and the Model Y. After the latest discounts, the Model 3 costs about $34,000 and the Model Y costs $38,000. But potential buyers from China, reappearing at the shows this year after the lifting of severe restrictions related to the virus, are attracted by competitors with a wide range of alternatives. For example, Chinese company BYD, which surpassed Tesla in global sales last year and has a market value of more than $100 billion, offers more than 60 different versions of electric and hybrid vehicles.