China is the largest EV market in the world. Over the last two days, Tesla and Chinese EV manufacturer Li Auto have lowered the price of their flagship models there. Tesla has also lowered costs in Germany and the US.

Tesla reported lower annual sales earlier this month—the first decline in nearly four years. This year, the company’s stock has already dropped by more than 40%.

China’s BYD has also faltered, with sales dropping to roughly 300,000 in the first quarter from more than 525,000 in the last three months of 2023, just after it momentarily overtook Tesla as the leader of the worldwide market.

The IEA stressed that the “pace of the transition to EVs… will hinge on affordability,” thus even though automakers may be suffering from the price reductions, they will be essential to boosting the uptake of EVs globally.

While the average price of new internal combustion engine cars continues to be lower in Europe and the US, over 60% of electric vehicles (EVs) sold in China last year were less expensive than conventional cars.

The IEA predicted that “intense market competition and improving battery technologies will reduce EV prices in the coming years.”

It also stated that “increasing exports of electric cars from Chinese automakers, which accounted for over half of all sales in 2023, could add to downward pressure on purchase prices.”

Tesla lowers prices in Germany, China, and the US as competition intensifies. The European Union launched a probe into China’s official support for EV manufacturers late last year due to worries over the country’s rapidly increasing EV imports.

Germany, the largest economy in the region and home to Volkswagen, Audi, and BMW, depends heavily on the auto industry, which also employs a large number of people in Europe.