Tesla said it will reduce the price of its standard range Model 3 vehicle in China to meet the government’s new eligibility requirements for subsidies.
This marks the second time this year that the automaker has reduced the price. Several months ago, the base version of China-made Model 3 was lowered by 9%.
Tesla has to cut the price of the vehicle to continue to qualify for government rebates on electric vehicles. The Chinese government instituted new regulations that require prices below 300,000 yuan for electric vehicles to qualify for subsidies.
The base price of standard range Model 3 made in China is 323,800 yuan, or $45,754 before subsidies.
The price reduction will go into effect tomorrow in China, Tesla CEO Elon Musk said in a earnings call Wednesday. Musk, who didn’t provide a specific figure, said he is confident that the vehicle will deliver a gross margin despite the reduction in price.
Tesla chief financial officer Zachary Kirkhorn added that the cost of vehicles produced at its Shanghai factory in the first quarter is already lower than the cost to produce the Model 3 in the United States. That margin should improve as the company improves its local supply chain in China. Tesla still ships some parts from the U.S. to build cars at its Shanghai factory.