Tesla dropped Model 3 price by a huge 24% in Japan. Why?

Tesla dropped the price of its Model 3 by a quarter in Japan in late February, a substantially larger decrease compared to recent price drops in Europe and the US and the EV maker’s biggest to date.

As The Driven reported in February, US prices for the Standard Range Plus (SR+) of both the Model 3 and Model Y were dropped by $US1,000 and $US2,000 while the Performance variant prices were raised.

In Japan, however, the price changes were much larger. In the case of the Model 3 SR+, Tesla dropped the price from ¥5,110,000 ($A61,810 converted) to ¥4,290,000 ($A51,900 converted) – a whopping 16%.

It also dropped the price of the Model 3 Long Range (LR) by around 24% from ¥6,552,000 ($A79,258 converted) to ¥4,990,000 ($A60,400 converted).

There is some speculation on why the price drop in Japan is so large, and why it has applied it to both the SR+ and LR variants.

Tesla dropped the price of its Model 3 SR+ in China in October 2020 by 8%, confirming it would start using the cheaper lithium-iron phosphate batteries made by Chinese battery maker CATL.

But this was not applied to the Long Range Model 3 which, despite being made at Tesla’s Shanghai factory since April 2020, still uses an NCA battery.

When it was revealed that the Shanghai-made Model 3 SR+ would make its way to other markets it was expected this price drop would be applied.

While this has not eventuated in Australia, where a 10% price drop down to $A66,900 was applied in late 2020, it has raised the question: If Japan can see such a large price drop, why not another in Australia, and why did Tesla also apply the price drop to the Long Range variant?

According to Bloomberg Quint, the answer is plain and simple. Japan is home to the first mover in the electric car market – the Nissan Leaf – and the first mover in the hybrid market, the Toyota Prius.

While Tesla boss Elon Musk reportedly once eyed Japan as one of the EV maker’s most important markets, it has proved largely impenetrable.

According to EV Sales, nearly half way into 2020 Tesla had sold only 376 Model 3s, compared to 5,704 Nissan Leafs and 2,606 Toyota Prius plug-in hybrids.

Takeshi Miyao, an analyst at consulting firm Carnorama in Tokyo told Bloomberg Quint that the latest price cut should have “a positive impact on sales,” and that Japan’s commitment to ban new petrol and diesel car sales by 2030 will also have an impact.

However, that is little comfort for hundreds of Australian drivers who are waiting to receive a vehicle from the first shipment of Shanghai-made Model 3s this month.

This article has been updated with correct percentage changes in price.