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    Tesla lowers Model 3 prices in China to stay competitive amid increasing competition and falling demand.

    by VT Markets
    /
    Sep 1, 2025
    Tesla has lowered the price of its long-range Model 3 in China to 259,500 yuan, equivalent to about US$36,279. This marks a 3.7% drop in the cost of the Model 3 rear-wheel drive sedan in the Chinese market. This price cut comes right after the launch of the new Model 3 version in China. Tesla is trying to keep its market share steady amid slowing demand for electric vehicles and rising competition from local brands.

    Pressure on Tesla’s Market Position

    This price reduction highlights the significant pressure Tesla faces in the market. It suggests potential challenges for short-term profits, making protective put options on TSLA a consideration. Recent data from August 2025 shows Tesla’s market share in China fell to 7.5%, while local giant BYD holds over 35%, pointing to tough competition. The changes bring uncertainty, likely increasing implied volatility in the options market in the coming weeks. This situation offers traders a chance to capitalize by betting that the stock’s price will move less dramatically than expected, possibly through strategies like selling premium with iron condors or strangles. This raises the question of whether the market’s reaction is exaggerated. Now, attention turns to the third-quarter delivery numbers, which will be the first real test to see if this price drop can effectively increase sales volume. We recall a similar pattern of price cuts in late 2023 that provided a temporary sales boost but later caused automotive gross margins to shrink. The important question is whether increased sales can compensate for lower revenue per vehicle.

    Competition with Chinese Automakers

    This strategy is not isolated; it directly challenges Chinese automakers like NIO and XPeng in the premium market. We can expect these competitors might introduce their own incentives or price changes, potentially sparking a broader price war. This could negatively impact sentiment across the entire EV sector, not just for Tesla. Create your live VT Markets account and start trading now.

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