Home >Auto News >Tesla unveils much cheaper Model Y in China after backlash

Tesla Inc. has debuted a significantly cheaper version of its locally built Model Y sports utility vehicle in China amid concern a string of negative publicity may have soured consumer sentiment toward the electric-carmaking pioneer.

The so-called standard-range version of the Model Y crossover starts from 276,000 yuan ($42,600) after government subsidies and Tesla began taking orders Thursday, according to its website. That’s about 20% less than the original longer-range Model Y, which can run for 594 kilometers (369 miles) on a single charge.

This latest version, which is available in Hong Kong but hasn’t been sold in China before, can run for 525 kilometers and because it’s priced under 300,000 yuan is eligible for a particular state new-energy vehicle subsidy. Its price is only 10% higher than Tesla’s most-basic China-made Model 3 sedan and deliveries will start as soon as next month.

“China has the world-leading new-energy market and is the first market outside the U.S. that Tesla owns a locally produced product," Tesla said in a statement. The company will “continue its investment in China and carry on its corporate mission of accelerating the world’s transition to sustainable energy and helping to boost the realisation of a carbon-neutral target."

Tesla, which counts China as its second-most-important market after the U.S., has a history of repeatedly lowering the price of its cars, particularly around the start of a new quarter, in order to boost sales. However Thursday’s launch is especially telling considering it comes after months of bad press in the world’s biggest electric-car market.

This year alone, Tesla has battled everything from an angry driver protest that went viral at the Shanghai Auto Show in April to online criticism about its perceived arrogance and lack of customer service. The California-based company has also weathered upsets that have seen its cars banned from some military complexes over concern the vehicles’ in-built cameras may be collecting sensitive data. Tesla immediately moved to reassure authorities, saying any data collected in China is stored locally.

The latest setback came last month when the Chinese government ordered that almost all the cars Tesla has sold in the nation -- more than 285,000 of them -- be fixed to address a safety issue. The State Administration for Market Regulation said vehicles’ autopilot systems could be activated automatically, potentially leading to crashes from sudden acceleration.

Tesla’s Model Y, a bigger, sportier car, is a make that Chief Executive Officer Elon Musk has said has the potential to outsell all other vehicles the company manufactures. In June, China’s Passenger Car Association forecast increased interest in roomier cars, particularly in the seven-seater category, as government rules allow parents to have more children.

“Chinese consumers love SUVs and crossovers," Tu Le, the managing director of Beijing-based consultancy Sino Auto Insights said after Tesla recorded a brisk jump in Model Y sales in May. “I think the Model Y is going to do really well toward the end of this year."

Read more: Elon Musk Loves China, and China Loves Him Back — for Now

The market will get more insight into how Model Y and Model 3 sales are tracking later Thursday when the Passenger Car Association releases delivery data, which will likely include domestic shipments as well as exports, for June. Sales of the longer-range Model Y, which starts from around 347,900 yuan, rose to 12,785 in May from 5,520 in April.

By way of comparison, Nio Inc.’s ES6 SUV, which competes head-to-head with the Model Y, starts from 358,000 yuan. Tesla’s lower price for the standard range will put pressure not only on local competitors but also foreign manufacturers including Volkswagen AG, which has launched similar models in the same price range.

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