Tesla cuts Model 3 Highland and Model Y prices again to battle BYD's relentless EV sales rise

BYD dethroned Tesla to become the world's largest electric vehicle maker globally, at least according to its Q4 numbers. While analysts still expect Tesla to sell more electric cars on an annual basis in 2024, the rapid rise of BYD presents a formidable competition for Tesla in the world's biggest EV market.

Not only does BYD have a more extensive electric vehicle portfolio than Tesla, including a mass market Seagull EV for under $15,000, but its vertical integration cost savings from being the world's second biggest battery maker also allow it to offer its cars at a cheaper price than Tesla.

It's precisely that price advantage that Tesla wants to erase now, as it just dropped the Model 3 Highland and the Model Y prices over at BYD's home turf yet again. The bestselling Model Y saw a more modest price cut of a bit over $1,000, while the Highland price dropped by 6% to the equivalent of $34,300 in yuans.

It is unclear if the Model Y and Model 3 price cuts will make it to the US, as Tesla just launched the 2024 Highland facelift here at the same price as its predecessor. In previous rounds of price cuts, however, of which there were several last year, where China's price adjustments led, the rest of Tesla's markets usually followed.

During its first significant EV price cut in 2023, Tesla China mentioned that it is constantly adjusting its pricing to reflect any real-time changes in supply chain and manufacturing costs. Giga Shanghai is by far Tesla's largest factory, though, and its economies of scale may be hard to replicate elsewhere.

Still, by the time the Model Y Juniper facelift launches this summer, though, Tesla may have been able to optimize its manufacturing costs enough for another price cut. Moreover, as US production of the Model 3 Highland ramps up, it could undergo a similar price drop, what with the glut of used Model 3 units at half off that Hertz and other rental car companies will now be pouring into the market.

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