Tesla plans to cut the price of standard Model 3 vehicles in China starting this week.
On a call with shareholders, Tesla CEO Elon Musk said that the price change will be effective "tomorrow, China time," though he didn't specify what the reduced price for the Model 3 cars would be. Tesla (TSLA) - Get Report shares were up 10% in after hours trading on Wednesday after it posted a quarterly non-GAAP profit of $1.24 per share.
Tesla was reportedly considering the price cut to qualify for rebates on electric vehicles offered by the Chinese government. To qualify for the subsidy, vehicles need to fall under a price threshold of 300,000 yuan, equivalent to roughly $42,391 in U.S. dollars.
Tesla's CFO Zach Kirkhorn added that by boosting efficiency at its Shanghai factory, Tesla will be able to "continue to bring price down and" and improve margins for the Model 3 simultaneously.
The coronavirus pandemic temporarily suspended production at Tesla's China factory earlier this year, and has weakened demand for cars and a range of other consumer goods.
In its first-quarter earnings report, Tesla did not adjust its previously issued delivery guidance of 500,000 vehicles for the full year 2020. It delivered 88,400 vehicles in the first quarter.
Analysts are skeptical that Tesla will be able to meet the 500,000 goal, given widespread supply and demand disruptions triggered by the coronavirus pandemic.
Tesla's main Fremont, Calif. factory has been closed since March 19, and Bay Area officials recently extended a shelter-in-place order that bars non-essential business activity until the end of May, though some low-risk activities are newly permitted under the extended order.
In its Q1 update, Tesla said it would "revisit" its overall full year guidance in its second quarter update.