Photo: Bloomberg

After a significant price adjustment for Tesla Model 3 in Japan in February, car sales seem to be picking up steam. With such a shift in price point, the country could become a new big market for the Californian manufacturer.

Japan, the third-largest car market in the world, has not become Tesla friendly. The country's government has played a leading role in promoting domestic producers, though this seems likely to change soon. Despite government support, local automakers will be drawn into price competition with Tesla.

On February 17, the American company cut prices for Model 3, making the cars more affordable in the Japanese market. This preceded the start of the export of the model from Giga Shanghai. The starting price of Model 3 Standard Range Plus has been reduced by $7,800 to $40,500 (¥4.29 million) from $48,300 (¥5.11 million). Model 3 Long Range dropped by $14,700 to $47,200 (¥4.99 million). Model 3 Performance price remained at $67,800 (¥7.17 million). The price decrease of Model 3 by almost 25% is a consequence of the fact that Giga Shanghai began production of right-hand drive vehicles for various markets, including Japan.

Just two weeks after the price drop, it seems like a lot of Japanese have turned their eyes to Tesla's electric vehicles. The delivery time for cars has doubled: from 6-8 weeks (before price reduction) to 12-16 weeks now. It is reported that it has even become more difficult to sign up for a test drive, indicating an increase in pre-orders. In order to get a test drive, you will now have to wait at least three weeks, compared to a waiting time of about one week before the prices were dropped.

For now, the Japanese government is pushing for a ban on the sale of gasoline-powered cars by the mid-2030s. Tesla's pricing policy is warning Japanese carmakers to consider broader EV development and deployment, and for existing offerings to lower prices.

“This proves that EVs will sell if they’re cheaper,” said Takeshi Miyao, an analyst at consulting firm Carnorama in Tokyo. “It's a shocking situation for Japanese automakers," he said, according to BNN Bloomberg.

Last year, Honda and Mazda started selling electric vehicles. Nevertheless, their cost is approximately ¥4.5 million, and the range is significantly less than that of Tesla cars. Meanwhile, Model 3 in Japan has become one of the most affordable EV options, especially considering its leading performance.

Given Tesla's manufacturing capacity, it will be difficult for Japanese manufacturers to compete, Miyao said. “It's going to be difficult for them to offer a similar value proposition,” he said.

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