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Tesla is raising car prices globally, with the biggest increase in China

Hong Kong (CNN) Tesla has raised prices in its key electric car markets, including China and the United States, reversing a series of recent price cuts that have pushed the company’s profit margin to its lowest since 2020 and sparked a price war.

The American automaker has raised the prices of its Model Y SUV and Model 3 sedan by 2,000 yuan ($289) in China, its biggest overseas market, according to the company’s website on Tuesday.

Model Y and Model 3 start nowpp of 263,900 yuan ($38,1[ads1]79) and 231,900 yuan ($33,550), respectively. But they are still cheaper than they were at the start of the year due to several rounds of significant reductions.

The same models, which account for a majority of Tesla’s sales, have also become 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 China’s.

Tesla (TSLA) has also raised the prices of the Model 3 and Model Y by about $222 in Canada and $269 in Japan, respectively.

The increases were the second time Tesla adjusted prices higher in a short period of time. Late last month, Tesla raised the prices of its high-end vehicles: Model S and Model X by $2,500 in the United States. But these vehicles made up only a small portion of total sales, 2.5%, in the first quarter.

The latest round of price adjustments reversed a series of significant price cuts by Tesla that were aimed at boosting demand. Last month, Tesla CEO Elon Musk confirmed the company’s pricing strategy on an earnings call, hinting at more price cuts to boost sales volume.

But analysts said the latest price increases had the same purpose of stimulating consumer demand.

Tesla may be trying to “reverse customer expectations for further price cuts” to prevent customers from adopting a further wait-and-see strategy, Citi analysts said on Tuesday.

You may also want to “test the elasticity of demand given that repeated price cuts may lead to impaired efficiency in increasing sales volume.”

Until recently, Tesla had cut prices aggressively to bolster demand amid growth competition from other electric car manufacturers.

In the US, the company had reduced prices six times this year before the latest increases.

In China, the world’s largest electric car market, Tesla made several rounds of cutbacks between October and January after losing market share to its Warren Buffett-backed rivals BID (I WILL). The cuts have sparked a price war in the country, with dozens of automakers following suit by offering steep discounts.

According to the latest statistics from the China Passenger Car Association, Tesla’s sales of its Chinese-made cars rose 35% in March to more than 88,000 units. But it was still behind BYD, which sold more than 100,000 pure electric cars with batteries.

The worldwide price cuts have boosted Tesla’s sales, but have also cut into net income and profit margins. In the first quarter, the company’s revenue rose 24%, but its gross profit margin fell to 19.3%, the lowest since late 2020. Net income also fell 24% from a year earlier.

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