Elon Musk’s visit underscores China's importance to global EV market, analysts say

From handshakes with Chinese officials to visits to China's apical ministries, Elon Musk's sojourn to Beijing is putting the spotlight connected China's spot successful the planetary electrical conveyance market.

The Tesla CEO's sojourn to China is simply a "very important one" for him, said Anthony Sassine, elder concern strategist astatine concern manager Kraneshares.

China accounts for 50% of Tesla's conveyance income and 20% of its accumulation capacity, and this sojourn would "set the communicative straight, to marque definite helium was connected the aforesaid leafage arsenic the [Chinese Communist Party]," Sassine told CNBC's "Street Signs Asia."

During Tesla's net telephone successful April, Musk identified U.S.-China tensions arsenic a hazard to the company's projections for 2023.

Politics is not the lone reason. Sassine pointed retired that the macro situation for EVs successful China has been "tough," and highlighted China's ending of subsidies connected caller EV purchases, arsenic good arsenic rising involvement rates successful the U.S.

In the look of specified conditions, companies person slashed prices to boost sales, and this volition wounded their profits, helium said.

Tesla slashed prices for its EV income successful China past October and January, but subsequently raised prices again successful May. Still, the terms of Tesla's cars remains little than astatine the commencement of 2023 owed to respective rounds of terms cuts crossed the world.

The information that Tesla was forced to slash prices successful the archetypal spot shows however important the China marketplace is to the U.S. electrical carmaker, said Bill Russo, laminitis and CEO of strategy and concern advisory steadfast Automobility.

"It signals however important the China marketplace is to support and however important it is to your planetary system, you request the standard of China moving for you," helium said connected CNBC's "Squawk Box Asia."

Russo said Tesla needs the economies of standard that China provides to support its outgo vantage globally, "but successful bid to prolong that, you request to marque definite that you support your relevance here."

It won't beryllium casual for Tesla, however. He noted that China the astir competitory marketplace for EVs, with Tesla competing with aggregate section companies for supremacy. "Tesla is, dissimilar different places successful the world, not the lone apical canine successful this market," helium added.

When asked if Tesla's strategy of cutting prices is appropriate, Russo said Tesla is "fighting with an older portfolio" — Model 3 was launched 3 years agone and Model Y 2 years ago.

As such, it has had to usage terms to vie against Chinese EV companies that are introducing caller models and to antagonistic the aging of its merchandise portfolio.

Russo pointed retired that Chinese EV shaper BYD sells extended scope hybrids. This is "a limb that Tesla doesn't have," helium said adding that BYD besides outsells Tesla 2 to 1 successful the axenic artillery electrical business.

As such, Tesla has to trust connected pricing to support its competitiveness, dissimilar different places astir the satellite wherever it doesn't look specified stiff competition.

"The occupation is Tesla everyplace other successful the satellite represents 'premium EV,' but successful bid to combat the conflict present successful China, you've got to wage a terms war," helium said.

"Generally terms wars are won by companies who tin outprice you and close present Tesla is not the lowest terms rival successful the market."