Tesla Inc. (NASDAQ:TSLA) is escalating its efforts to invigorate demand for its electric vehicles in China, introducing significant incentives to counteract the fierce competition, particularly from BYD, in the paramount EV market globally.

In a strategic move disclosed through its Weibo account on Friday, the American electric vehicle giant announced that purchasers of its available stock of the rear-wheel drive variants of Model 3 and Model Y throughout this month would be eligible for substantial incentives and discounts amounting to thousands of dollars.

The incentives include insurance subsidies up to 8,000 yuan (approximately US$1,113), effectively reducing the prices of the Model 3 and Model Y to CNY245,900 and CNY250,900 respectively, translating to a price reduction of over 3% for each model. Additionally, Tesla is offering a CNY10,000 discount on selected body paint colors, further sweetening the deal for prospective buyers.

This latest initiative by Tesla is a response to the intensifying competition and widespread price reductions within China’s automotive industry, as manufacturers vie for a larger market share amidst decelerating vehicle sales and surplus production capacity in the world’s second-largest economy.

Tesla’s move follows closely on the heels of recent price adjustments by BYD, the leading electric vehicle manufacturer backed by Warren Buffet, which recently surpassed Tesla in global EV sales. Last week, BYD announced cuts exceeding 10% on several of its models and introduced new versions of four vehicles this week, priced significantly lower than their predecessors.

Analysts Kelvin Lau and Evelyn Zhang from Daiwa Capital Markets highlighted the impact of BYD’s pricing strategy, noting that it is “exerting pressure on the overall industry” and “intensifies competition among new-energy vehicle makers for 2024.”

In January, Tesla proactively reduced the starting price of its entry-level Model 3 by 5.9% and the Model Y by 2.8%, indicating the company’s ongoing commitment to maintaining a competitive edge in the crucial Chinese market amidst an escalating price war.