China has slapped US carmakers with extra tariffs in recent months as the trade war with the US escalates.
The levies mean Teslas have become considerably more expensive than they were, so the company, led by eccentric billionaire Elon Musk, has cut prices of its Model S and Model X by between 12% and 26%.
Tesla hopes the move will allow it to remain competitive in the world’s largest car market.
“We are absorbing a significant part of the tariff to help make our cars more affordable for customers in China,” a Tesla spokesperson said in a statement.
It is not the first time Tesla has readjusted its prices in China. In May, the firm lowered prices of its models after Beijing officials said they would cut import tariffs for all auto imports.
Only a couple of months later, it hiked prices in response to the tariffs. But with demand in China for electric vehicles growing rapidly, Tesla doesn’t want to see its market share eroded.
The tariffs have forced Tesla to accelerate investment in its first overseas Gigafactory in Shanghai as cars made there would be exempt from additional duties.
The stock fell 2.7% to US$338.19 on Thursday. It is marginally up in after-hours trading at US$338.40.