Tesla (TSLA) is doing its best to fend off competition in China

Tesla (NASDAQ:TSLA) is pulling all stops to fend off competition in China, including introducing a new subsidy program that requires the automaker’s internal insurance program. The automaker is facing worthwhile competition from Chinese automakers, according to a note from analysts at Morgan Stanley, which has led to Tesla using some strategies to persuade consumers to buy their products at the expense of others.

The Chinese auto market is highly competitive and has the largest number of potential customers in the world. China has routinely dominated other countries in terms of the number of vehicles registered annually, and as the auto industry begins to shift more rapidly to electrification, China’s automakers have also introduced their best technology in an effort to drive fees.

Even Tesla CEO Elon Musk has commented in the past that Chinese automakers are among his company’s biggest competitors.

“I have a great deal of respect for the many Chinese automakers for driving these technologies,” Musk said. “My frank observation is that Chinese car companies are the most competitive in the world, especially because some of them are very good at software, the software that will shape the future of the auto industry, from design to manufacturing and especially self-driving.”

Morgan Stanley Repeat this point in a note from September 19where analysts commented that Tesla shareholders should not ignore local Chinese brands:

“Tesla China faces its biggest ever competition in China from local Chinese EV companies which has prompted the company to ramp up its long-awaited promotional activities in the Chinese market.”

The memo went on to explain how Tesla is trying to fend off worthy competition in China by offering a variety of advantages. One includes the delivery schedule, which has been significantly reduced. Tesla is also offering a new $1,140, ​​or CNY 8,000, subsidy to customers who already have a reservation for a Model 3 or Model Y. However, that subsidy comes with a catch, because the customer must have an in-house insurance program from Tesla, which has expanded to China last year after launching in the US in 2019.

Morgan Stanley said:

“Despite Tesla’s success in reducing delivery time to 1-4 weeks from 4-8 weeks earlier, amid rising production, the China auto team says Tesla has begun offering a $1140 (CNR8000) subsidy to its customers who have already You have a reservation for Form 3/Y. This support (only available to customers who purchase Tesla insurance) is available from September 16 to September 30.

According to local media, these promotions can help entice consumers to “secure” their orders and ease the pace of delivery in peak season while introducing new customers to the brand at more affordable rates to complement shorter delivery schedules.”

Although Morgan Stanley remains optimistic about Tesla, the company states that companies such as NIO, Xpeng, Li Auto and others are popular and have “competitive model pipelines” that can compete with Tesla. These automakers also offer discounts and subsidies to lower prices.

Disclosure: Joy Klender is a contributor to TSLA.

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Tesla (TSLA) is doing its best to fend off competition in China

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