Tesla lowers Model 3 and Model Y prices in China. And in Australia…

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Tesla has made significant progress this year after exiting its major manufacturing centers and despite rising raw material costs and higher transportation costs.

Now it looks like things are calming down with Tesla announcing plans to cut prices for all of its EV models in China.

Tesla has reduced the prices of all its models by thousands of Australian dollars. That brings the base Telsa Model 3 RWD to 265,900 RMB or $57,982 AUD. It was first reported on Tesla’s official Weibo social media account then by Sawyer Merritta Tesla investor, on Twitter.

This is over $3,000 down from the previous post-subsidy price which hovered around AUD $61,049 with the current exchange rate.

Similarly, a new Tesla Model Y RWD is now worth AUD$63,012 after subsidies, down from AUD$69,111. These are deep cuts across Tesla’s electric vehicle lineup to allow the Model Y RWD to qualify for New Energy Vehicle (NEV) subsidies that end for Chinese customers at the end of this year.

This is also following a ramp-up in Shanghai’s production capacity after Tesla’s Gigafactory upgrade. Last month, the factory produced more than 80,000 electric vehicles, setting a new record.

Image: Rice Akhtar

What does this mean for Australian order holders and would we expect to see a similar price drop in our local market anytime soon?

Prices in Australia will remain at current levels

While Tesla planned to create greater demand in China and lower prices there, the same is unlikely to happen in Australia any time soon.

One of the main factors behind this is the high cost of shipping and transportation to a “low volume” market like ours.

Image: Rice Akhtar

With raw material prices, transport and delivery costs remaining at high levels, Tesla has more incentive to sell more of its electric vehicles where they produce them. With China being the largest producer and consumer of electric vehicles in the world, it makes sense that Tesla would sell more of them with lower logistics costs.

Australia still has a backlog of Model 3 orders dating back to March this year. Some of them were placed at lower prices than what Tesla charges Australian customers today. Tesla is fulfilling these orders for our market while maintaining an industry-leading automotive gross margin.

Body shop Shanghai Gigafactory 3. Source: Tesla
Body shop Shanghai Gigafactory 3. Source: Tesla

Much of this is being reinvested into R&D and expanding their production footprint to reach the production target of 2 million units by the end of next year.

As demand for logistics and other commodities decline over the next few months, we may see prices fall in Australia. This could be good news for those considering a used EV too and help bring those high prices return to a healthier level.

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