Tesla (NYSE: TSLA) has tweaked its insurance incentive scheme in China as the company looks to deliver a record number of cars in the fourth quarter of 2022.

Tesla was previously offering an insurance incentive of 7,000 yuan between October and December. It has now raised the incentive to 8,000 yuan for November but lowered it to 4,000 yuan for December.

On its official Weibo account, Tesla said, “As long as you like it enough, pick up Tesla immediately!” Notably, Tesla sold a record 83,135 China-made vehicles in the wholesale market in September. Its deliveries increased by 8% on a month-on-month basis and outpaced the 5% increase in wholesale vehicle deliveries in the country.

However, in October it sold 71,704 China-made electric vehicles which were 14% below the September deliveries. Tesla also closed its flagship showroom in the country last month.

Tesla delivered 343,000 cars in the third quarter of 2022. While it was a record quarter, the company missed delivery estimates in the quarter. It missed consensus delivery estimates in the second quarter as well.

While Tesla posted better-than-expected profits in the third quarter of 2022, it missed revenue estimates and also lowered its 2022 delivery guidance. It now expects 2022 delivery growth to be lower than 50%.

Tesla Offers Insurance Incentives in China to Spur Sales

Meanwhile, the insurance incentive is intended to help Tesla spur its sales in China. During the Q3 2022 earnings call, Musk said, that the fourth quarter is looking “extremely good” and the company would have an “epic” end to the year.

He also refuted that Tesla would lower production. Musk said, “we’re very pedal to the metal come rain or shine. So, we are not reducing our production in any meaningful way, recession or not recession.”

Bernstein analyst Toni Sacconaghi wasn’t too impressed after Tesla’s Q3 earnings call. “Answers to many questions on the earnings call were curt and almost dismissive, with CEO Musk instead repeatedly making very bold prognostications about Tesla’s future and capabilities,” he said in his note.

Sacconaghi also expressed concern over the demand for Tesla cars. He said, “Lead times for cars have come down dramatically, especially in China, and we worry about weaker consumer spending and incremental competition.” He added, “We believe that Tesla’s order backlog declined in the quarter, pointing to orders lagging current production rates.”

Meanwhile, some other analysts, especially Morgan Stanley maintained their buy rating on Tesla stock. After President Boe Biden signed the Inflation Reduction Act of 2022, several Wall Street analysts turned on Tesla.

Tesla Lowered Car Prices in China

Notably, last month, Tesla announced a price cut in China and lowered prices by as much as 9%. The company has reduced the starting prices for Model Y SUV from 316,900 yuan to 288,900 yuan. It cut prices for Model 3 sedan from 279,900 yuan to 265,900 yuan.

Notably, Tesla faces competition from Chinese EV companies like NIO and Xpeng Motors. BYD Motors has been another tough competitor and it has overtaken Tesla to become the largest seller of NEVs (new energy vehicles) in China as well as globally.

In August BYD began delivering the BYD Seal Model which is similar to Tesla’s best-selling Model 3 sedan. However, the model was priced $10,000 below that of Tesla’s Model 3. BYD expects to sell 4 million Seal cars in 2023.

BYD is backed by Warren Buffett’s Berkshire Hathaway. While Buffett has sold some BYD shares this year, he has bought more Apple shares. We have a guide on buying Apple stock.

Musk Is Looking at an Epic Fourth Quarter

Tesla is known to provide sales incentives towards the end of the quarter in order to spur sales. While releasing its Q3 deliveries it admitted that its deliveries are skewed towards the end of the quarter.

By providing higher insurance incentives in the penultimate month of the quarter, Tesla seems to be trying to even out the deliveries and escape the typical end-of-the-quarter rush.

Meanwhile, while Musk sees an “epic” fourth quarter and sees strong demand, Tesla has lowered prices and offered insurance incentives in China in order to spur sales.

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