Tesla just opened up a big new customer base in China after slashing prices in April to meet a key threshold

Shubhangi Goel
·2 min read
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  • A local Chinese government just approved Tesla's Model Y approved for use.

  • This is the first time Tesla's cars are eligible for government purchases in China.

  • Government approval could help Tesla amid global demand slump and rising competition.

Tesla's Model Y cars just made it on the list of approved vehicles of one local government in China, unlocking a new customer base for the electric vehicle giant.

The EV can now be used as a service car by party, government, and public body officials in Jiangsu according to official Chinese media outlet The Paper. The province, north of Shanghai, is an education and manufacturing hot spot with one of the highest GDPs in the country.

This was the first time Tesla's cars have been made eligible for government purchases in China, the outlet reported. The Model Y is part of a longer list of approved electric or hybrid cars, including several domestic manufacturers and a model from Volvo, which has a Chinese parent company.

The local procurement center told the media that Tesla signed up for the list.

The center evaluated Tesla's cars based on several factors, including passenger capacity, range, charging time, and price of no more than 250,000 yuan, or about $34,400.

Tesla's best-selling Model Y just met the cutoff point, with a starting price of 249,900 yuan in China. The carmaker slashed prices by 14,000 yuan, or $1,930, in April, in what was seen as a response to slowing demand and a price war with Chinese rivals.

Tesla met one other condition at the procurement center: Cars cannot be imported.

The American EV maker fulfilled this requirement because the Teslas are domestically produced, and its Shanghai factory uses over 95% local parts, The Paper reported.

While being on the list is not a sure indicator of future sales, given the large number of approved cars, the approval is a win for Tesla and CEO Elon Musk.

The local government's approval may pave the way for a wider rollout in other provinces, allowing Tesla to tap into a new customer base. Tesla EVs are already being used and tested by government bodies in Venice, Florida.

The approval also comes as Tesla faces a slump in global EV demand and rising competition from Chinese EV heavyweights like BYD. While recent deliveries beat analyst expectations, Tesla reported on Tuesday that sales fell for the second straight quarter, down nearly 5% compared with the same period a year ago.

Both China and Musk have been eager to play nice. In April, Musk visited the country and its second-highest-ranking politician, Premier Li Qiang, to discuss self-driving technology.

Read the original article on Business Insider