China car prices ‘well-supported’ after Tesla price cut

Mercedes-Benz finance chief on Wednesday told CNBC the automaker’s pricing of its cars in China is “well-supported” after U.S. electric vehicle giant Tesla slashed prices.

“We definitely see the demand being well but also we see the pricing levels we put into the market being well-supported in the market in China,” Harald Wilhelm, CFO of Mercedes-Benz group told CNBC’s Julianna Tatelbaum in response to a question on Tesla slashing prices.

“We are not shooting for the mass, we are shooting for the top end, for the luxury segment, and this one usually proves to be more resilient also in times of macro uncertainties or troughs.”

China is the largest market for Mercedes-Benz. The German auto group sold 222,641 cars in the country in the third quarter of this year, up from 132,579 units in the same period last year.

The CFO’s comments come after Tesla on Monday slashed the price of its Model 3 and Model Y vehicles in China, one of the company’s most critical markets.

That was after Elon Musk’s company raised the prices of its vehicles earlier this year as a result of rising raw material costs.

Tesla did not give a reason for the price cuts. But the Chinese economy, which did see a bump in the third quarter, is still facing a number of challenges including the country’s strict Covid containment policy which has weighed on consumer appetite.

Tesla’s price cut comes as competition ramps up in China from domestic electric car firms such as Warren Buffett-backed BYD as well as upstarts Nio and Xpeng.

While Mercedes-Benz still relies heavily on sales of traditional combustion engine cars, it is ramping up its electric vehicle capabilities, which is likely to put it in more direct competition with Tesla. In the third quarter, Mercedes-Benz sold 84,850 electric vehicles, up 39% year-on-year. But they still only account for around 16% of the company’s total volume.

Mercedes-Benz’s Wilhelm also addressed the supply chain issues that have been plaguing automakers, in particular a shortage of key semiconductors.

Wilhelm said the supply chain situation has “improved” but he remains “cautious,” saying that demand is “being constrained by supply” — of semiconductors in particular.

He said that some of these issues will remain in 2023.

Mercedes-Benz reported third-quarter earnings of 5.2 billion euros ($5.18 billion), up 83% year-on-year.