October 25, 2022: -Tesla shares plunged in premarket trade after the company slashed the price of a few of its cars in China.

The electric carmaker’s shares were down almost 3% in New York before the market opened on Monday.

Tesla the price of its Model 3 and Model Y vehicles in China, one of the company’s critical markets.

The beginning price for the Model 3 sedan is decreasing to 265,900 Chinese yuan from 279,900 yuan. The Model Y sports utility vehicle costs 288,900 yuan versus the last price of 316,900 yuan.

Tesla’s price cuts partly reverse various of the price increases the company was forced to carry out in China and the U.S. on rising raw material costs.

Elon Musk, the CEO of Tesla, warned that his electric car company is “seeing significant latest inflation pressure in raw materials & logistics.”

The price cuts come after Musk added that he is experiencing elements of a recession in China.

“China experiences a recession of sorts,” mainly in the property markets, Musk said in the previous week.

Tesla delivered 343,000 vehicles on September 30, missing analyst expectations. Tesla also missed analyst expectations on revenue in the third quarter.

 The company needs to break out how many cars were produced in China.

Although, in September, the China Passenger Car Association reported Tesla in providing 83,135 China-made electric vehicles, a record for the company. Tesla has a massive Gigafactory in the Chinese city of Shanghai, completing upgrades this year.

Still, the price cuts appear in the face of increasing competition for Tesla in China from the domestic company Warren Buffett-backed BYD and upstarts Nio and Xpeng.

As rising raw material costs reach these companies, other electric carmakers have hiked costs this year, which include BYD and Xpeng.

The Chinese economy faces challenges as strict Covid-19 controls continue to weigh on retail sales. Third-quarter gross domestic product increased by 3.9% from a year ago, which beats expectations but remains less than the official target of nearly 5.5% growth.