Tesla cuts price for China-made Model 3 to qualify for subsidies

U.S. electric vehicle maker Tesla Inc said on Friday it has cut the starting price for China-made Model 3 sedans by 10 percent to qualify for subsidies in the world's biggest auto market.

Tesla, which started delivering cars from its two-billion-U.S.-dollar Shanghai car plant in December, said in a statement it cut the starting price for its Standard Range Plus Model 3 sedans to 271,550 yuan (38,463.17 U.S. dollars), after receiving 20,250 yuan per car as EV subsidies.

China had announced plans in 2015 to end subsidies for electric vehicles this year, but said in March it would extend them. However, it said the subsidies will apply only to passenger cars costing less than 300,000 yuan.

Tesla China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, China January 7, 2020. /Reuters

Subsidies extend, but to decrease

China has set a target for NEVs, which also include plug-in hybrids and hydrogen fuel cell vehicles, to account for a fifth of auto sales by 2025, compared with the current five percent, as it seeks to cut pollution and cultivate home-grown auto sector champions.

Under the new plan, China will extend subsidies for buying NEVs to 2022, and tax exemptions on purchases for two years.

The move of extending the subsidies brings new energy vehicles (NEV) a cost-price advantage of more than 20 percent over traditional fuel vehicles, a huge favorable policy worth tens of billions yuan.

But subsidies are not steady. Last Thursday, China's finance ministry said it will cut subsidies on NEV by 10 percent this year.

China will in principle cut subsidies by 20 percent in 2021 and 30 percent in 2022, the finance ministry added. But it will not reduce subsidies on commercial NEVs for public purposes this year.

China is the world's biggest car market, where more than 25 million vehicles, including 1.2 million NEVs, were sold last year.

(With input from Reuters)