In a move to combat declining sales and growing competition in major markets, Tesla, the world's largest maker of electric vehicles (EV), has announced aggressive price cuts in China and Germany. These price reductions come shortly after the company reduced prices in the United States.

Tesla has been resorting to price cuts dating back to early last year in an attempt to maintain demand amidst increased competition from traditional automakers entering the EV market and higher interest rates affecting buyer affordability. However, these reductions have negatively impacted Tesla's profit margins, causing a 4% decline in its stock ahead of its first quarter earnings report.

China, which is Tesla's largest overseas market, witnessed significant price cuts recently. The starting prices of four Tesla models were slashed by 14,000 yuan ($1,932), with the Model Y now being offered at its lowest-ever price of 249,900 yuan ($34,502). In Germany, Tesla’s largest market in Europe, the price of its Model 3 rear-wheel drive was lowered by 2,000 euros ($2,132) to 40,990 euros ($43,707).

These price cuts follow Tesla's decision last Friday to reduce the prices of three out of five models in the United States. The Model Y, Model X, and Model S each saw a $2,000 reduction, while the prices of the Model 3 and Cybertruck remained unaffected.

Tesla's struggles have been evident this year, with its stock falling by over 40% since the beginning of 2024. This decline was triggered by a drop in quarterly deliveries, the first time in nearly four years, as well as job cuts representing more than 10% of its global workforce.

In India, Tesla CEO Elon Musk announced the postponement of his planned trip, citing heavy obligations at the company. Musk was expected to meet Prime Minister Narendra Modi and potentially announce the construction of a Tesla factory in India, the world’s most populous country.

Tesla's price cuts in China are expected to fuel an existing price war within the highly competitive EV sector. In response, Chinese EV maker Li Auto swiftly announced price cuts for all four of its models, with its Li Mega, touted as the world's largest passenger EV, now selling for 30,000 yuan ($4,142) cheaper.

Tesla's dominance in the Chinese market briefly wavered in the fourth quarter of last year when it was overtaken by China's BYD as the world's bestselling EV brand. BYD's more affordable entry-level model, priced at just below $10,000, posed tough competition compared to Tesla's Model 3, which currently costs 231,900 yuan ($32,017) following the recent price cut.

China's EV price war originated in October 2022 when Tesla initiated price reductions to boost sales during an economic slowdown. Subsequently, numerous major manufacturers, including traditional gasoline vehicle makers, followed suit, impacting the entire auto industry's profit margins. This intense competition has continued into 2024, with over 30 car manufacturers announcing further price cuts.

XPeng, a Guangzhou-based EV maker, recently declared subsidies worth 500 million yuan ($69 million) for buyers interested in four of its models. In March, BYD lowered the starting price of its Seagull hatchback by 5% to 69,800 yuan ($9,670). Additionally, smartphone manufacturer Xiaomi entered the EV race by launching its SU7 sedan in an attempt to rival Tesla.

As Tesla grapples with declining sales and formidable competition, these aggressive price cuts in China and Germany are the company's latest strategy to maintain its foothold in the highly competitive global EV market. All eyes are now on Tesla's upcoming first quarter earnings report to gauge the impact of these pricing adjustments on the company's financial performance.