Hong Kong (CNN) Tesla has raised prices in its most important electric vehicle markets, including China and the United States, reversing a series of recent price cuts that pushed the company’s profit margin to its lowest since 2020 and sparked a price war.
The US automaker has raised prices of its Model Y SUV and Model 3 sedan by 2,000 yuan ($289) in China, its largest overseas market, according to the company’s website on Tuesday.
Model Y and Model 3 now startings Priced at 263,900 yuan ($38,179) and 231,900 yuan ($33,550), respectively. But it is still cheaper than it was at the beginning of the year due to several rounds of deep discounts.
The same models, which account for the majority of Tesla sales, are also getting more expensive in the US, with the Model Y starting at $47,240 and the Model 3 at $40,240. But the $250 increase was less than the increase in China.
Tesla (TSLA) It also raised the prices of the Model 3 and Y by about $222 in Canada and $269 in Japan, respectively.
The increases marked the second time Tesla had revised prices higher in a short period. Late last month, Tesla raised the prices of its high-end cars: the Model S and Model X by $2,500 in the US. But those vehicles made up only a small portion of its total sales, 2.5%, in the first quarter.
The latest round of price adjustments reversed a series of deep price cuts by Tesla that were intended to boost demand. Last month, Tesla CEO Elon Musk confirmed the company’s pricing strategy in an earnings call, hinting at more price cuts to boost sales volume.
But analysts said recent price increases had the same purpose of fueling consumer demand.
Citi analysts said Tuesday that Tesla may be trying to “reflect customer expectations for further price cuts,” in order to prevent customers from adopting another wait-and-see strategy.
You may also want to “test the elasticity of demand since repeated price cuts may result in less effectiveness in increasing sales volume”.
Until recently, Tesla aggressively cut prices to support demand amid growth Competition from other electric vehicle makers.
In the US, the company has cut prices six times this year before the latest increases.
In China, the world’s largest market for electric cars, Tesla conducted several rounds of cuts between October and January after losing market share to rivals such as the Warren Buffett-backed BYD (I will). The cuts sparked a price war in the country, and dozens of automakers followed suit by offering deep discounts.
According to the latest statistics from the China Passenger Car Association, Tesla’s sales of its China-made cars rose 35% in March to more than 88,000 units. But it still lags behind BYD, which has sold more than 100,000 pure battery EVs.
Price cuts around the world boosted Tesla’s sales, but also reduced its net income and profit margins. In the first quarter, the company’s revenue increased by 24%, but its gross margin fell to 19.3%, the lowest level since the end of 2020. Its net income also decreased by 24% from last year.