Tesla price cuts to spark further competition in China, says Morgan Stanley

Morgan Stanley analyst Tim Hsiao notes that Tesla (TSLA) officially cut the MSRP of Model 3 and Model Y in China following recent price cuts by Li Auto (LI), based on which the firm thinks investors will be looking for “further reactive price adjustments” by local peers and see the market react negatively to mass-market peers, like BYD and XPeng (XPEV). Though based on the firm’s channel checks, Tesla’s price cut was “more moderate than the market had expected,” the firm thinks major OEMs may look to undercut competitors to lock in as many orders as possible and it believes destocking will be prioritised ahead of new launches in March/April, so it does not expect any relief in price competition before the Lunar New Year in February.