Tesla has said that they will begin taking orders in China for a lower-priced version of their Model 3 car as of Friday.
The American electric car company is aiming to accelerate sales in China following the trade issues between Washington and Beijing. And their lowering of prices is part of a strategy to keep a profitable foothold in the country.
Tesla has confirmed that Chinese customers will be allowed to place orders for a long-range, rear-wheel drive Model 3 variant, which should cost 433,00 yuan ($64,300.56), with a medium-range Model 3 going at $35,950 for starters.
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The starting price for a long-range, all-wheel-drive Model 3 in China was 499,000 yuan but that figure has since dropped.
Tesla currently exports all the cars they sell to China but are now in the process of building a Shanghai factory to produce Model 3s in the first phase. The California-based company has made a deal with the Chinese government to lease land in the country for 50 years.
"We need to bring the Shanghai factory online. I think that's the biggest variable for getting to 500,000-plus a year," Tesla owner Elon Musk told CNBC. Our car is just very expensive going into China. We've got import duties, we've got transport costs, we've got higher costs of labor here. And we've never been eligible for any of the EV tax credits.
"A lot of people criticize Tesla for being so dependent on incentives. In fact, for a company making EVs, we have the least access to incentives. It's pretty crazy. Because there's so many countries that have put price caps on the EV incentive which differentially affect Tesla. And in China, which is the biggest market for EV's, we've never had any subsidies or tax incentives for vehicles.
"So, it's difficult. Once a car is made there, it is eligible for that. That sounds like that's going to be reducing in China in the coming years. But really, bottom line is, we need the Shanghai factory to achieve that 10,000 rate and have the cars be affordable. It's important to appreciate, the demand for Model 3 is insanely high.
"The inhibitor is affordability. It's just that people literally don't have the money to buy the car. It's got nothing to do with desire. They just don't have enough money in the bank account. If the car can – if we made it more affordable, the demand is extraordinary."
Tesla had previously revealed that their business in China suffered a blow after Beijing raised tariffs on imports of U.S vehicles to 40 percent last July. The Asian country, though, has since issued a temporary suspension of the additional 25 percent, reverting to the previous 15 percent charge.
Musk's company has adjusted prices of their U.S-manufactured cars in China to keep them affordable over there, despite the return to normalcy, and to help them maintain an edge over local electric vehicle startups.