Mercedes-Benz follows Tesla and cuts EV prices in China

Mercedes-Benz has cut the price of some of its electric models in China, following market leader Tesla, which last month slashed prices in the latest sign of softening demand in the world’s largest EV market.

The starter prices for the EQE model, the EQS model and its luxury edition — the AMG EQS 53 model — sold in China will be reduced by Rmb50,000 ($7,000), Rmb204,600 and Rmb198,600, respectively, the German carmaker said.

“We aim to flexibly adjust operational strategies in response to shifting market demands,” the company said in a statement.

Although China’s sales of new energy vehicles, including pure electric, plug-in hybrid and hydrogen-powered models, jumped 81.7 per cent year on year to 714,000 units in October, it is the slowest pace of growth since April, according to data from the China Association of Automobile Manufacturers.

Tesla cut prices for its Model 3 and Model Y saloons in China in October. Days after Tesla’s move, Ford Motor’s EV arm and Aito, a Huawei-backed EV brand, followed suit.

Western carmakers are racing to create EVs with longer driving ranges, allowing drivers to travel between cities without charging.

Given China’s size, its drivers are more likely to drive in urban settings and opt for luxury features such as spacious passenger seating.

Mercedes’ EQS model, which has a long range, has a more compressed back compared with other models by the carmaker, which is preparing to launch a sport utility vehicle version.

Local rivals are also becoming increasingly competitive in the space of electric and digital transformation, Hubertus Troska, responsible for China activities at Mercedes, told the China International Import Expo this month, state media reported.

China has quickly grown to become the world’s largest market for EVs, and homegrown brands such as BYD are looking to take over on European turf.

Analysts warned of a price war in the country’s increasingly crowded EV sector.

“This price-cut strategy would generate overall negative sentiment,” Citigroup analyst Jeff Chung wrote in a research note, citing stalling EV sales growth because of economic headwinds and zero-Covid controls in China.

Chung added that Tesla’s move would put pressure on other high-end electric carmakers including XPeng, Volkswagen and BYD.