China NEV Subsidy

Tesla Giga Shanghai To Reduce Model 3 Price As It Nears 4,000/week Production Rate


Elon Musk said that Giga Shanghai plans to reduce the price of the MIC Model 3 SR+ in the next few days during Tesla's Q1 2020 Earnings Call. TSLA also announced that Giga Shanghai was close to reaching a 4,000 per week production rate. 

The Chinese government updated its new-energy vehicle subsidy regulations last week, effectively excluding Giga Shanghai's MIC Model 3 SR+ and Long Range variants. The locally-made Model 3 barely missed qualifying for the new NEV subsidy regulationsAfter an official statement from the government, China's NEV subsidies will apply to vehicles which are RMB¥300,000 and below. The MIC Model 3 SR+ starts at RMB¥303,500 without subsidies.

Tesmanian previously reported that Giga Shanghai could easily adjust the price of the MIC Model 3 after taking certain steps, like localizing more of its parts. During Tesla's Q1 2020 Earnings Call, Elon Musk confirmed that the price of the Model 3 SR+ will be reduced within the next few days.  

"So we are making rapid progress on lowering the production cost in China, and we're actually excited to announce on this call that we will be reducing the price of the Standard Range Model 3, basically tomorrow China time," said Elon Musk, answering an institutional investor's question. He said the price reduction will be below the subsidy limit.

Tesla's CFO Zachary Kirkhorn added,"And there's still significant opportunity left to take cost out so a fixed cost absorption from higher production volumes, which are occurring in Q2 and will occur through the rest of the year." Kirkhorn explained that Giga Shanghai still hasn't fully localized its supply chain either which could drive down costs and expand gross margin even further in the long run. 

According to the Shareholder's Letter, Tesla released before the Earnings Call, Giga Shanghai could reach a production rate of 4,000 per week for the Model 3, translating to a run rate of about 200,000 vehicles per year. It was unclear whether Tesla meant both the MIC Long Range and SR+ variant. However, it is clear that Giga Shanghai's production volumes are increasing rapidly and MIC Tesla vehicles could reduce in price accordingly. 

Featured Image Credit: Tesla

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Ma. Claribelle Deveza

Ma. Claribelle Deveza

Longtime writer and news/book editor. Writing about Tesla allows me to contribute something good to the world, while doing something I love.

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