The cut drops the price of the Long Range model by 4.5% to 299,900 yuan ($41,326), and its Performance model by 3.8% to 349,900 yuan ($48,216).

The company is also offering an insurance subsidy worth about $1,000 for its Model 3 vehicles until the end of September. 

Tesla’s move is the latest cut from the car manufacturer, which has slashed prices since late last year in a bid to juice sales and recapture market share from domestic competitors. 

Now weak sales may have pushed the automaker to slash prices again.

The company’s China sales fell by 31% between June and July, according to data from the China Passenger Car Association.

BYD, the Warren Buffett–backed carmaker that’s Tesla’s biggest competition in China, reported a 3% month-on-month increase in sales over the same period. Tesla’s market share is the lowest it’s been in nine months, according to a Reuters analysis of CPCA data. 

Tesla did not immediately respond to a request for comment.

The price war pact

Last month, China’s automakers pledged not to “disrupt fair competition with abnormal pricing,” a reference to the price war. They were joined by Tesla, the only foreign automaker to take part. (The pledge also contained a promise to uphold China’s “core socialist values.”)

The truce didn’t last long.

Tesla offered a cash rebate to new customers the very next day, and the China Association of Automobile Manufacturers—the group brokering the agreement—withdrew the pledge soon after, citing China’s antitrust law. (Chinese officials had earlier called the price cuts “reckless.”)

Monday’s decision by Tesla may have spooked investors, worried that a new round in the price war is about to begin.

Some of Tesla’s competitors also cut prices earlier this month. On Friday, Geely lowered the cost of Zeekr 01, one of its electric car models, by over $5,000. Leapmotor, a Hangzhou-based automaker, also lowered its prices in August.

Shares in BYD, which has not cut prices recently, sank by 6.2% in Monday trading in Hong Kong. Tesla shares are down 1.8% in premarket trading.

China’s domestic auto market is already in a slump, with a 2.6% year-on-year decline in car sales last month, as the country’s economy stumbles owing to low consumer confidence.

Almost 36% of cars sold were “new energy vehicles,” a category that includes both battery-powered electric vehicles and plug-in hybrids.

It’s not all bad news in China.

The country’s car exports surged by 63% year on year last month, widening China’s lead over Japan, once the world’s largest auto exporter. 

China’s more affordable EV models are now poised to compete with other auto manufacturers, thanks to their affordability. 

“The time has come for Chinese brands,” BYD founder Wang Chuanfu said at a BYD event last week. “It’s an emotional need for the 1.4 billion Chinese people to see a Chinese brand becoming global.”

The company then played a video where a narrator called on China’s automakers to “demolish the old legends and achieve new world-class brands.”