Tesla cuts car prices in China on tariff fears

Tesla has said it is slashing the prices of its Model X and Model S sedan cars in China, as it attempts to absorb the hit from US President Donald Trump's ongoing trade war with the region.

Prices will be cut on its top two models by up to 26 per cent to make the cars more "affordable", as the popularity of so-called new energy cars rises in the world's largest auto market.

The move marks a stark change from Tesla's earlier strategy in China, having raised prices by about 20 per cent to account for incoming tariffs in July.

Tensions worsened between the US and China last weekend, after US vice president Mike Pence vowed the country would not back down from its trade dispute with China. The US has placed tariffs on $250bn (£194bn) of Chinese goods to date, which Pence "could more than double" if Beijing does not acquiesce to its demands.

Tesla said last month it had been facing a challenging environment in its newest market, where its costs have risen 55 to 60 per cent as a result of the tariffs.

It is accelerating construction of its gigafactory in Shanghai in response, as Tesla currently imports all of its cars for Chinese buyers.

"We are absorbing a significant part of the tariff to help make our cars more affordable for customers in China," Tesla said in a statement sent to Reuters.

Tesla's latest Model 3 launched pre-sales in China last week, with deliveries to start in March or April.