China recently announced it was cutting subsidies for electric vehicles (EVs) in the country by 10% this year, with further reductions in the following two years.
The result is that only EVs with a price of less than ¥300,000 ($58,900 CAD) qualify, leaving the made-in-China Model 3 out of the picture, as its currently priced at ¥323,800 ($63,600).
During Tesla’s Q1 2020 earnings call yesterday, Elon Musk announced that beginning today, the Standard Range (SR) would be getting a price cut in order for it to once again qualify for the incentives.
Tesla has only recently been able to qualify for the incentives with the completion of Giga Shanghai and the production of made-in-China Model 3’s. Up to that point, the only Tesla vehicles in China were imported, which disqualified them from receiving the incentive.
Production at Giga Shanghai has been rapidly ramping up, with the last estimate at over 3,000 units per week. As the manufacturing process matures, and as more supply lines are sourced locally in China, the margin on the Model 3 increases, giving Tesla the flexibility to lower the price to meet the rules for the incentives.
According to Tesla chief financial officer Zachary Kirkhorn, the cost to produce the made-in-China Model 3 is already lower than the cost to produce at Fremont.