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Electric vehicle maker, Tesla (NASDAQ:TSLA) announced on Friday that the company has cut the price of various model configurations of Model 3 and Model Y, with MSRP of entry-level Model 3 down by RMB 36,000 to RMB 229,900 and that of entry-level Model Y down by RMB 29,000 to RMB 259,900.
Citi Research analysts think that Tesla’s strategy is to ultimately gain market shares from both mid-high-end ICE and NEV peers. However, they believe that Tesla price cut will pose the biggest threat to Xpeng (NYSE:XPEV), as well as B-class ICE models from JV brands (including Honda Accord, Toyota Camry, VW Magotan, and Tiguan).
The analysts wrote in a note, “The difference between Tesla and Xpeng is that the former has already got positive FCF, decent OPM and operating leverage in order to implement lower-cost and lower-ASP strategy, while the latter is still trying to survive via pure cost-cutting method. We believe better sales volume visibility from Tesla may improve 2023-24 earnings visibility towards its part market.”
Shares of TSLA and XPEV are down 1.89% and 16.05% respectively in mid-day trading on Friday.
