Will Tesla's Latest Price Cut Help It Regain Momentum in China?

Tesla, Inc. TSLA has cut the price of its Model 3 rear-wheel drive in China as competition from domestic automakers intensifies. Deliveries of this version are expected to start this month. The new price is set at ¥259,500, down 3.7% or ¥10,000 from the launch price on Aug. 12.

In recent weeks, Tesla has rolled out two fresh versions of its Model 3 and Model Y in an effort to offset weakening demand in China. 

China’s auto sector has been locked in a fierce price war, and aggressive discounts have pushed the government to step in. In May 2025, Beijing issued a warning that automakers could face penalties if they cut prices in response to risks in the EV industry, as declining margins jeopardize overall profitability.

The restrictions have already hit industry leader BYD Company Limited BYDDY, which reported its first quarterly profit decline in more than three years, per Reuters.

Tesla’s latest price reduction comes as BYD takes away Tesla’s market share in Europe. In July, Tesla’s sales plunged 40% for the seventh consecutive month, while BYD’s sales tripled. The downtrend persisted into August. Per Reuters, in August, Tesla registered only 210 vehicles in Sweden, down 84% compared with the same month last year. This year, other automakers in China have also announced price cuts. TSLA carries a Zacks Rank #4 (Sell) at present. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In May, BYD ignited a price war by slashing prices on 22 models from its Dynasty and Ocean series by up to 34% to counter sluggish sales in the first four months of 2025. The discounts, however, were limited to June 30. The automaker has set a bold sales goal of 5.5 million units for 2025, up 30% from the previous year.

Last week, NIO Inc. NIO, often referred to as “China’s Tesla,” announced that all of its models will now come equipped with a 100 kWh long-range battery pack as standard, without raising starting prices. This move effectively amounts to a price cut, as buyers previously had to pay extra for the larger 100 kWh pack or settle for the smaller 75 kWh version. To offset the change, NIO is adjusting its purchase incentives but will continue offering its battery rental plans, with the 100 kWh pack priced at 1,128 yuan per month and the 75 kWh option at 728 yuan per month.

TSLA’s Price Performance, Valuation and Estimates  

Tesla has underperformed the Zacks Automotive-Domestic industry year to date. Its shares have lost 17.3% compared with the industry’s decline of 15.3%. 

 
From a valuation perspective, TSLA appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 10.35, higher than the industry’s 2.75.  

The Zacks Consensus Estimate for 2025 and 2026 EPS has moved down 17 cents and 3 cents, respectively, in the past 30 days.

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This article originally published on Zacks Investment Research (zacks.com).

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