Tesla Inc. slashed prices for its Model 3 in Japan, part of a wider effort to build its presence and spur demand in a market that has seemed largely impenetrable for the electric vehicle maker.
The base price of the standard model was cut to 4.29 million yen ($40,500) from 5.11 million yen on Thursday, while the long-range version saw an even steeper drop of 1.56 million yen to 4.99 million yen. The performance sedan remained at 7.17 million yen.
The reduction of almost a quarter off the cost of its mid-level Model 3 is the Palo Alto, California-based carmaker’s latest attempt to stimulate sales in Japan. A little over six years ago, CEO Elon Musk was eyeing Japan as one of Tesla’s most important global markets. But as of last year, the automaker sold less than 2,000 units in the country, up just slightly from the year before.
This is the first time the price of the Model 3 in Japan has been cut and the timing coincides with the models starting to be imported to Japan from Tesla’s Shanghai factory instead of from the U.S., said a person familiar with the matter.
Tesla routinely lowers the price of its cars in the U.S. and China, and the addition of lower-cost Model 3 vehicles in other markets has helped sales. Despite its relatively small footprint in the world’s third-largest auto market, Tesla sold 500,000 models globally last year, an increase of 36%.
Achieving volume sales in Japan will be critical for Musk to meet his ambitious goal of selling 20 million cars a year by 2030. Beyond just lowering prices, in recent years Tesla has been cutting the ribbon on a number of new stores throughout Japan and building out its charging infrastructure in the country.
The price cut “should have a positive impact on sales,” said Takeshi Miyao, an analyst at consulting firm Carnorama in Tokyo. Tesla sales in Japan are also likely to receive another “significant drive” from the government’s plans to ban new gasoline cars by the mid-2030s, Miyao said.
The move to slash prices also comes as Tesla braces for stiffer competition in Japan’s EV market, with new models such as the much-anticipated Nissan Motor Co. Ariya electric crossover set to be released later this year. Tesla also lacks the recognition within Japan that domestic automakers enjoy. A 2019 poll by Nikkei Research found that only half of 1,000 adults polled knew of Tesla. That compares with 98% who said they knew of Nissan.
Despite the Model 3 being the top-selling electric vehicle last year, Tesla may fall in terms of its overall market share as the EV market in places like Japan gets bigger and new players from China enter the picture, even though its sales and profit will likely continue to grow, according to Miyao.
EV passenger cars made up only 21,000 of the 5.2 million new vehicles registered in Japan in 2019, according to Japan’s Automobile Manufacturers Association.