Tesla shares sank in premarket trading on Monday, while China's Li Auto plummeted to an 11-month low, after both companies slashed prices of their electric vehicles (EVs) in various markets amid intense competition. The price cuts come as EV makers face declining sales and growing competition, particularly in China, the world's largest EV market.

U.S. EV giant Tesla cut the starting price of its Model 3 in China to 231,900 yuan ($32,000) on Sunday, a reduction of 14,000 yuan, as reported by Reuters. The company also slashed prices in other major markets, such as Germany, where the price of its Model 3 rear-wheel drive was lowered by 2,000 euros ($2,132) to 40,990 euros ($43,707). These price reductions follow similar cuts announced in the United States on Friday, when Tesla reduced the prices of three of its five models by $2,000 each.

Meanwhile, Li Auto, a Chinese EV maker, cut prices for its models, including the L7, L8, L9, and the newly launched MEGA SUV, by up to 30,000 yuan, according to a statement on its Weibo account on Monday. The company's Hong Kong-listed shares fell 8.3% to their lowest level in 11 months during the Monday session, while shares of other Chinese EV makers, such as Nio, Xpeng, and BYD, also fell.

The price reductions come at a time when competition in China's EV space has intensified, with local automakers pushing to outsell U.S. rival Tesla with advanced technology and competitive pricing. Eugene Hsiao, head of China equity strategy at Macquarie Group, noted in a research report over the weekend that all of China's biggest EV makers have one goal in mind - "taking the crown from Tesla." Hsiao added that the price discounts were just one facet of a variety of strategies that big EV players in China are using to survive "the coming wave of industry consolidation."

The flurry of price cuts comes during a challenging period for Tesla, which has seen its stock plunge more than 40% year-to-date after reporting a drop in quarterly deliveries for the first time in nearly four years and announcing job cuts equivalent to more than 10% of its global staff. On Saturday, Tesla CEO Elon Musk said he had postponed his planned trip to India, citing "very heavy" obligations at the company.

In China, Tesla's price cuts are expected to exacerbate an existing price war in a highly competitive sector. Chinese EV maker Li Auto responded to Tesla's price cuts by announcing it was cutting the prices of all four of its models with immediate effect. The company's Li Mega, which it claims is the world's largest passenger EV, now sells for 30,000 yuan ($4,142) cheaper.

The competition in China's EV market continues unabated in 2024, with more than 30 major car makers announcing further price cuts. In March, BYD lowered the starting price of its most affordable EV, the Seagull hatchback, by 5% to 69,800 yuan ($9,670), while smartphone manufacturer Xiaomi joined the EV race by launching its SU7 sedan to take on Tesla.

The ongoing price war in China's EV market has raised concerns among investors about the impact on profit margins for the entire auto industry. As competition intensifies and EV makers continue to slash prices, the industry faces the prospect of consolidation, with smaller players potentially being squeezed out of the market.