Tesla swallows the “bitter pill” of price cuts

The Shanghai Auto Show is in full swing, and the April day is restless. However, when ice cream is no longer just to relieve the heat, there will be another way to make car companies and the market “terrified”.

The Shanghai Auto Show has a great momentum, and it is also the one that places the greatest hope on the Chinese auto industry in the past three years. It’s just that even under such a background, there are still three “reputable” auto brands that were not present: Tesla, Wuling, and Jidu.

Putting Wuling and Jidu aside for the time being, is Tesla afraid of repeating the same mistakes again and encountering “brake failure”?

“Tesla is going to cut prices again. On the Chinese market this Saturday, the starting prices of Model 3 and Model Y will drop to 186,900 and 215,900 respectively.”

Also during the Shanghai Auto Show, news of Tesla’s price cuts in the Chinese market came out again, and the price cuts were even exaggerated and a bit scary. In fact, the price cut news is not groundless. In recent foreign markets, the United States, Europe, Israel, Singapore, Japan, Australia, and South Korea have all ushered in a wave of Tesla price cuts.

According to this logic, the Chinese market, which has Tesla’s Shanghai manufacturing base, will inevitably usher in a new wave of price cuts. But today, Saturday has passed, and I have not seen the price cut I was looking forward to, and Tesla officials have also refuted the rumors.

Will this be the end of Tesla’s price cuts? Or, does Tesla have other reasons?

Tesla swallows the "bitter pill" of price cuts

Perhaps, since 2023, relying on price cuts to stimulate sales, Tesla does feel a little bit distressed about money. On April 20, Tesla released its first quarter financial report for 2023.

According to data, Tesla’s global delivery volume in the first quarter increased rapidly, exceeding 422,000 vehicles, a year-on-year increase of 36%, and its total revenue also increased by 24%, reaching 23.33 billion US dollars. But on the other side of the coin, the net profit dropped by 24% to only US$2.513 billion as more cars were sold.

Unprofitable revenue, or less profitable revenue, is not only a sign of the rapid development of the company, but also an indication of the company’s shortcomings. Compared with Tesla, the reduction in net profit will most likely affect its stock price. After all, the capital market still depends on “money”.

But it must be admitted that the implementation of the price reduction strategy not only caught competitors by surprise, but also further promoted Tesla’s market share. Taking the Chinese market as an example, Tesla no longer attracts only customers with a budget of 250,000 to 300,000 yuan, but even some people with a budget of more than 180,000 yuan.

Tesla swallows the "bitter pill" of price cuts

Just like Li Bin once said, Tesla wants to be the public in the era of new energy vehicles. And it is not difficult to find that Tesla is indeed penetrating into the low-end market.

At the investor day event in early March this year, Tesla announced that after process improvement, the assembly cost can be reduced by 50%; and the production and manufacturing efficiency is continuously improved, and the average annual output growth rate is expected to continue to reach 50%, so as to achieve 1.8 million production in 2023. vehicle target.

Since then, Musk has also publicly stated that Tesla’s plan to launch low-priced new cars has not changed. According to the calculations of relevant agencies, the cost of Tesla’s new car may be 15,000 US dollars, or about 100,000 yuan, and the listing price is expected to be around 150,000 yuan.

If all the inferences are true, then in the domestic market, apart from BYD, it seems that there is no single enemy of Tesla.

Moreover, according to its financial report, in the first quarter of 2023, Tesla’s gross profit rate was 19.3%, which is a lot lower than the 29.1% gross profit rate in 2022. Compared with other car brands, it is still an insurmountable mountain.

The good news is that various domestic car companies, as well as a series of new car-making forces, are working hard to make adjustments.

Tesla swallows the "bitter pill" of price cuts

Changan Deep Blue is gradually getting out of the circle, Chery iCar is starting to make efforts, Geely Galaxy is following closely behind, FAW Hongqi is focusing on new energy, and new car-making forces such as NIO, Ideal, Xiaopeng, Nezha, and Leap are all continuing Release their latest products and conquer every market segment.

Indeed, there is no need to deny Tesla’s combat effectiveness, and if it wants to disrupt China’s new energy vehicle market through a “price war”, there is a high probability that it will see results in the early stage, just like it is now.

But on the other hand, this method of “damaging yourself by 800 and injuring the enemy by 1,000” will definitely not last long. The resilience of China’s new energy vehicle industry chain will also become more tenacious and stronger under the guidance of pressure from all parties and the joint efforts of various enterprises.

Whether Tesla will swallow the “bitter fruit” of the “price war” is not important. What is important is whether domestic auto brands can face up to difficulties, seize opportunities, and break through the cage. After the Shanghai Auto Show, the market development trend gradually became clear. As for the final result, we will wait and see.

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