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Tesla will need to cut Model 3 prices to qualify for updated Chinese EV incentives

China will cut subsidies by 10% this year, and no Tesla vehicle meets the new price threshold.

Tesla Model 3 deliveries in China
The Model 3 will need to cost less to qualify for government subsidies.

If Tesla wants to partake in the generous incentives the Chinese government dishes out for new-energy vehicles, it's going to need to cut the Model 3's price.

Reuters reported Friday that as of April 23, the Chinese government cut subsidies for electric cars by 10% and new rules are now in place. For an automaker to receive the incentive, it must sell an EV for less than 300,000 yuan, or roughly $42,400 at current exchange rates. As the changes were announced, Tesla actually increased the price for the cheapest Model 3 available for order from 299,050 to 303,550 yuan, the automaker's website shows.

There's a three-month phase-in period for the new rules to take effect, meaning Tesla is still eligible for now, so it could be that this increase is temporary before Tesla reduces the price to under 300,000 yuan to qualify for the government subsidies. Tesla didn't immediately respond to a request for comment.

Tesla just recently expanded the Model 3 lineup locally to produce a new Long Range and Performance variant at its Shanghai-based factory. The move also saw the lineup reconfigure to effectively cut prices by 16% earlier this month. CEO Elon Musk also said he plans to start Model Y production in China, and will pursue a local design center to develop China-specific cars.

China doesn't plan to ease up on the subsidy cuts. In 2021, it will cut the subsidies another 20%, and the year after, another 30%. The incentives are meant to spur EV sales in the country to help it meet emissions goals and bolster domestic electric automakers. China also plans to increase requirements for driving range and efficiency to qualify for the subsidies.

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