Tesla’s Price Cuts Give It US Tax Credit Boost, New Model Adds to China Allure

Tesla (TSLA) slashed the price of its premium Model S and X, making the latter eligible for EV tax credits in the U.S., while also launching a longer-range Model 3 in China.

The Austin, Texas-based EV maker has cut the price of its Model S and Model X by around 14% and 21% in China and the U.S. The latest reduction in the Model X price, which is now down 41% since the turn of the year, makes it eligible for the $7,500 U.S. federal tax credit.

New Model To Boost China Sales?

Tesla also announced an upgraded Model 3, with a longer driving range. The new model comes with a 12% higher starting price than its predecessor and is the first of the company’s vehicles to be launched in China before the United States.

Tesla’s new Model 3 will come with a longer driving range of 606 km (377 miles) on the base model and will be exported to Asia, Europe, and the Middle East. The company said deliveries will begin in the fourth quarter, and the China-first launch shows Elon Musk’s desire to go head-to-head with domestic manufacturers.

Chinese automakers have been market share from Tesla in recent months, with sales for the U.S. company down 30% in July. The latest price cuts continue the price war that was started by Tesla in January and led to a slump in margins.

Competition is rising fast with the latest sales numbers for August showing a combined record month for Li Auto (LI), Nio (NIO), and XPeng (XPEV) in the Chinese market.

Tesla shares were down about 2.5% in early trading Friday, though they have more than doubled year-to-date.