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The standard Model 3 version saw a decrease of 36,000 yuan, while the high-performance version dropped by 20,000 yuanMeanwhile, for the Model Y, the rear-wheel drive variant's price was lowered by 29,000 yuan, the long-range version by 48,000 yuan, and the high-performance model by 38,000 yuanThis series of adjustments has allowed Tesla to achieve the lowest new car prices in its history.

Tesla's Vice President of External Affairs, Tao Lin, publicly endorsed this price strategy, asserting that Tesla adheres to a cost-based pricing model rooted in “first principles.” This approach emphasizes a commitment to transparency and sustainable pricing practices as mirrored in Tesla’s foundational operational philosophy.

Notably, since September 2022, Tesla has previously conducted multiple price adjustments, including initiatives aimed at reducing prices through promotional insurance offers

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For instance, during mid-September last year, Tesla provided an 8,000 yuan insurance subsidy to customers who completed their car purchases at Tesla showrooms and opted for the insurance offered there, effectively reducing the purchase priceFollowing this, on October 1st, yet another subsidy initiative was rolled out: consumers purchasing vehicles between October 1st and December 31st could receive a reduction of 7,000 yuan on the final payment when they opted for vehicle insurance from Tesla's cooperative insurance agencies.

On October 24th, Tesla officially lowered the prices of the Model 3 and Model Y by varying amounts, ranging from 14,000 to 37,000 yuan, with the starting price for the Model 3 at 265,900 yuan and the Model Y at 288,900 yuan after the adjustmentsNot surprisingly, just weeks later, Tesla conducted yet another indirect price reduction through the implementation of further insurance incentives, slashing an additional 8,000 yuan off costs.

Automotive analysts have suggested that these successive price cuts may indicate a worrying trend of diminishing demand for Tesla vehicles in an intensely competitive marketplace

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The rapid influx of competitors in the electric vehicle sector necessitated these adjustments to not only retain existing customer interest but also to secure new orders essential for meeting ambitious sales targets.

Industry insiders argue the underlying challenge of insufficient orders prompted these price reductionsAs production capabilities increase while the launch of new products remains on the horizon, Tesla’s sales channels struggle to alleviate inventory pressures, prompting the company to turn to price cuts on existing products as a last resortWhile these reductions may appear beneficial for consumers, they simultaneously exert pressure on competing automakers, potentially igniting an early price war for 2023, thus shaping the competitive landscape for this year.

On January 3 of this year, Tesla released its global production and delivery reports for 2022. The manufacturer achieved a quarterly production figure of 439,700 units and a delivery volume of 405,300 units in Q4 alone, hitting a total annual production tally of 1.37 million units—a remarkable year-on-year increase of 47%. The delivery count for the year reached 1.31 million units as well, representing a 40% growth from the previous year

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Notably, more than half of these annual deliveries originated from the Shanghai Gigafactory, illustrating the significant role that this facility plays in Tesla's overall productivity.

However, the discrepancies between manufacturing output and sales were strikingIn the second quarter of 2022, Tesla reported a global output of 258,000 vehicles with nearly matching delivery figures of 254,000. Despite this balance, the third quarter showcased a notable shortfall with actual sales trailing behind production by 22,000 units—a trend that exacerbated further in the fourth quarter, leading to an alarming surplus of approximately 34,000 vehicles.

This widening gap is closely linked to the capacity expansion at Tesla's Shanghai factory, which underwent significant upgrades in July 2022, boosting its output capacity to an impressive 1.1 million units—a staggering increase of 127%. Nevertheless, despite this enhancement in operational capacity, sales failed to keep pace, resulting in escalating inventory accumulation

Reports surfaced around December that the Shanghai facility encountered multiple shutdowns as a result of this rising inventory.

Insider information suggested that Tesla anticipated reducing output at its Shanghai factory, with reductions anticipated to take effect on the week of December 5, forecasting a decrease in capacity of 20%. During the holiday period spanning December 25 to January 1, production of Model Y was set to pause as part of this reduction planHowever, Tesla quickly dispelled these notions, asserting their inaccuracy.

Nevertheless, reports soon emerged suggesting that the production at the Shanghai factory was indeed halted on December 24, ahead of the planned shutdown period that was supposed to commence later in the month