Arya News - Tesla is designing a cheaper version of its bestselling Model Y and investing in its autonomous-driving software in mainland China, as it works to reverse a sales slide in the world`s largest electric vehicle (EV) market. The new Model Y variant will be 20 per cent cheaper than the existing editions, which are priced from 263,500 yuan (US$36,406) to 303,500 yuan, according to two people with knowledge of the matter. The US carmaker plans to start producing the car next year at its Shanghai facto
Tesla is designing a cheaper version of its bestselling Model Y and investing in its autonomous-driving software in mainland China, as it works to reverse a sales slide in the world"s largest electric vehicle (EV) market.
The new Model Y variant will be 20 per cent cheaper than the existing editions, which are priced from 263,500 yuan (US$36,406) to 303,500 yuan, according to two people with knowledge of the matter. The US carmaker plans to start producing the car next year at its Shanghai factory.
The company has also sent engineers to Baidu to better integrate the Chinese partner"s map information with its driver-assistance system to improve its recognition of mainland lane markings and traffic signals, Reuters reported. Neither company would comment on the report.
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Tesla"s locally made vehicles have lost their lustre among mainland drivers amid brutal price competition and rapid technology advancement by domestic rivals. Deliveries from Tesla"s Gigafactory 3 in February slumped 51.5 per cent month on month and 49.2 per cent year on year to 30,688 - the lowest since July 2022.
In December, sales of Tesla"s Model 3 fell behind those of the SU7 , developed by smartphone vendor Xiaomi , by a total of 25,815 to 21,046, sounding an alarm for the US-based company regarding the competitiveness of Chinese-developed rivals in terms of style, performance and technology.
"Tesla needs to launch new models or at least fine-tune its existing product line to retain its market share in China," said Zhao Zhen, a sales director at Shanghai-based dealer Wan Zhuo Auto. "A lower-priced Model Y could technically help it bolster sales now that local rivals can offer midsize intelligent EVs at prices just half those of Tesla"s vehicles."
In 2020 when the Gigafactory started operations, Tesla"s mainland sales of around 180,000 units accounted for more than 16 per cent of the total EV sales nationwide. Last year, Tesla"s mainland deliveries stood at 657,000, which translated to a 6 per cent market share. In February, that figure dropped to 4.3 per cent.
Chinese rivals including BYD, the world"s largest EV builder , and Xpeng have launched dozens of models, siphoning off buying interest from Tesla"s Model 3 and Model Y.
People look at a Xiaomi SU7 Ultra at the 2025 Mobile World Congress in Barcelona, Spain, on March 3, 2025. Photo: Xinhua alt=People look at a Xiaomi SU7 Ultra at the 2025 Mobile World Congress in Barcelona, Spain, on March 3, 2025. Photo: Xinhua>
An entry-level edition of Xpeng"s Mona M03 , an EV fitted with preliminary autonomous-driving technology, is priced at 119,800 yuan, just half the price of the Model 3.
Chinese brands also offer a constant stream of steep discounts to woo local customers. In 2024, a record 227 models, including both electric and petrol cars, had their prices cut, compared with 148 in 2023, according to data from the China Passenger Car Association. In 2022, only 95 models were sold at a discount.
Mainland China is Tesla"s second-largest market worldwide, trailing only the US. The Shanghai factory is the carmaker"s largest production base.
Tesla last month rolled out its much-heralded autonomous-driving software, which is known as Full Self-Driving in the US, on the mainland for 64,000 yuan.
About 15 million new cars in China - even models priced below 100,000 yuan - will have preliminary autonomous-driving technology this year as the cost of the technology declines, according to industry estimates.
Tesla"s weak sales in China last month were in line with its decline in other markets, such as Europe and Australia, as consumers were concerned about its CEO Elon Musk"s political engagements.
Tesla began delivering an upgraded version of the Model Y on the mainland in late February, but buyers in Shanghai are still waiting for deliveries due to a production shortage.
This article originally appeared in the South China Morning Post (SCMP) , the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP"s Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.
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