Tesla China released new NEV subsidy regulations, which the Tesla MIC Model 3 SR+ and Long Range barely missed. However, Tesla China can easily adjust the price of Shanghai factory’s Model 3 to meet the government’s new EV subsidy requirements.
China’s Ministry of Finance released a statement that contained its new energy vehicle (NEV) subsidy's requirements and guidelines. The Ministry of Finance explained that the new policy was made to support the “high-quality development of new energy vehicles and the vehicle industry…”
The first section of the statement addressed the government’s intention to extend NEV subsidies and ease their withdrawal in the future. In this portion, the statement roughly translated to: “Comprehensive technical progress, scale effect and other factors will extend the implementation period of NEV financial subsidy policy until the end of 2022. In principle, the subsidy standards for 2020-2022 will be reduced by 10%, 20%, and 30% from the previous year.”
Privately-owned new energy vehicles (PEVs) that are ¥300 or below are eligible for China’s new EV subsidy. Tesla Giga Shanghai’s MIC Model 3 SR+ starts at ¥303,550, a little above the required price tag to qualify for China’s new NEV subsidy. However, the locally-made Model 3 may still have a chance at qualifying for China's new NEV subsidy.
Tesmanian believes that Tesla China could find ways to reduce the cost production of Giga Shanghai’s MIC Model 3 and decrease its starting price. Several pieces of information have been released in the last couple of months, which could help Tesla China reduce the cost of the locally-produced Model 3, both the Standard Range Plus and Long Range variants.
First, there was news that Tesla China would be using CATL cobalt-free batteries, which some predicted were Lithium-Iron-Phosphate (LFP) batteries. News also broke that Tesla China could experiment with prismatic cells and a non-LFP battery. Either way, the new battery Tesla China ordered from CATL might reduce the overall production cost of the MIC Model 3.
In addition to the new type of batteries, Tesla China also announced that it planned to work with more local vendors and suppliers for car part production. Localizing Giga Shanghai's supply chain could significantly reduce production costs and the price tag of the MIC Model 3.
Besides the possible reasons mentioned above, however, it is important to keep in mind that Tesla wants to make its vehicles more affordable and accessible to people. Price reduction is instrumental to Tesla’s goal. The MIC Model 3 only missed the price requirement for China’s new NEV subsidy by ¥3,550 or US$500. Tesla may still find a way to decrease the MIC Model 3’s cost by US$500.
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