Tesla says lower Model Y and Model 3 production costs behind its drastic 14% price reduction

The base RWD Model 3 now starts from the equivalent of US$33,427, while the entry-level Model Y costs just US$37,875 in China after Tesla made another round of price cuts there. The Model 3 price is 14% down - its most drastic price decrease ever - while the Model Y's tag is again lowered by 10% like Tesla did just a couple of months ago. This makes the Model Y 43% cheaper than in the US, while the Model 3 price is now 30% lower than it is for Americans.

Tesla's leadership in China took to the social networks to explain that the increased manufacturing efficiencies which followed the retooling of Tesla's most productive Gigafactory in Shanghai were behind today's Model 3 and Model Y price cut. According to the Tesla China's PR VP Grace Tao Lin:

Behind Tesla’s price adjustments, there are countless engineering innovations, which are essentially unique, and excellent laws of cost controls including not limited to vehicle integration design, production line design, supply chain management, and even millisecond-level optimization of robotic arms Synergistic route.

Back in October, Tesla lowered the Model Y and Model 3 prices in China by another 10%, and threw in other buyer incentives, such as free coats of paint or preferential insurance rates. In the US, Tesla holds out on direct price cuts for now, as the January 1st introduction of the Inflation Reduction Act EV subsidies would've cut the price of its vehicles by US$7,500 anyway, so it just offered the exact same deal to buyers with December deliveries, plus free Supercharger miles.

It remains to be seen if the arrival of Giga Shanghai's overhauling chief Tom Zhu in the US and his promotion to be Tesla's second in command after Elon Musk will result in the same synergies that will allow direct vehicle price cuts on this side of the ponds as well.

While Tesla China's PR head may be waxing poetic about production efficiencies, industry analysts are of the opinion that slumping demand and increased competition from local brands like the world's largest EV maker BYD have contributed to the latest Model 3 and Model Y price cut round there. The new Model 3 price now makes it much more competitive against the BYD Seal sedan, for instance, which starts at the equivalent of US$31,130 in its RWD version with standard 340-mile range.

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