Author: Michelin
Just as I set my alarm and prepared to work hard on double 11 this Monday evening, I was awakened by the news that Tesla had adjusted its prices early in the morning. After experiencing six price increases this year, Tesla has finally lowered its prices.
On October 24th, Tesla’s official website in China announced the price adjustment. The domestic models Model 3 and Model Y have been reduced by RMB 14,000 to RMB 37,000. The flagship Model Y long-range version has been directly reduced by RMB 37,000.
Over the past year, we have been watching electric cars go up in price, new models being released constantly, and seeing them compete in terms of configuration. Such an obviously price war tactic caught us off guard.
Winter hasn’t even come, and Tesla has already cut prices for itself, silently passing on the cold air to those rivals who are struggling for survival.
Why lower prices? – For kpi
After Tesla announced the price cut, various “expected” voices appeared online for the first time, but this time it’s true.
As hard-working people like you and me need to meet our kpi at the end of the year, so does the former world’s richest man, Elon Musk. If you ask why lower prices, the simple summary is: for kpi.
For Tesla, this kpi is the 50% annual growth rate hanging over their heads.Last week, Tesla released its Q3 financial report, with a total global sales volume of 908,000 vehicles for January to September this year, which is close to last year’s full-year sales volume of 936,000 vehicles. However, considering the 50% growth KPI, Tesla needs to deliver 1.4 million cars this year, which means nearly 500,000 vehicles need to be delivered in the remaining three months. This not only means that the factory needs to increase production power but also that orders need to be sufficient.
Last month, the Shanghai Super Factory just completed production line upgrades, with an annual production capacity of over 750,000 vehicles, more than enough. However, it seems that orders are not so secure.
Earlier, some organizations predicted that in September, Tesla’s global backlog of orders was about 293,000 vehicles, lower than August’s 299,000 vehicles, and had continued to decline. The most intuitive feeling is that currently, ordering a Model Y from the official website only takes “1-4 weeks” for delivery, which is much more comfortable than the peak period of 10+ weeks waiting time. Even with “Golden September and Silver October,” Tesla had to start making plans for its end-of-year delivery volume in advance.
In fact, as early as the Q2 financial report meeting in July, Musk mentioned that as inflation subsides, “price reduction in the future cannot be ruled out.” It seems that the strategy of lowering prices needs to be saved for the end of the year as the ultimate trump card.
In addition to the price war, Tesla has also brought out other benefit cards this time, such as the return of the “referral mechanism.” Compared with the referral mechanism that was cancelled last year, this time the “treasure box” has many more surprises. It seems that in addition to the price war, Tesla is also playing a viral marketing game.
Who can win the cake in the price war?
Since this round of price adjustment is for kpi, the most concerned question is of course how much kpi can Tesla achieve by reducing prices? Who are the kpis targeting?
From the perspective of price, everyone present in the range of 250,000 to 350,000+ will be more or less affected.
This price range is where the B-level car market targeted by Model 3 is concentrated and where every automaker wants a share. It is also the area where mid-to-large-sized SUVs with high Model Y content are in high demand. There are high-end products from domestic brands, entry-level electric cars from luxury brands and joint ventures, as well as the trump models of new forces.
You may think that I am exaggerating, but I am not. On the one hand, many consumers do consider Model Y and other models when choosing a car, and a price reduction at this time can be the last straw to make a decision. Some may say that price adjustments only appeal to price-sensitive customers, but with the economic winter approaching, who can guarantee that they are not price sensitive?No wonder why Model Y, as the sales champion of electric cars this year, has the largest price cut in this round of adjustment. When it comes to market competition, one should use the most competitive products to win.
On the other hand, even if Tesla isn’t the first choice for some consumers, the “target” attribute of Model 3 and Model Y still exists.
In the past period of time, Model 3 and Model Y were the benchmark for many products, whether openly or implicitly. From size to design, from endurance to power, there were comparisons everywhere, including prices.
Especially for independent brands and second-tier new forces, the price of Tesla’s entry-level products is a threshold they have to consider when pricing. Many newly launched brands may have no products available yet, but the market has already been snatched away.
For Tesla, although sacrificing profits is necessary when they seize the market by lowering their prices on the basis of close to 30% gross profit margin, the loss is limited. However, for those opponents who have yet to make a profit, if they are involved in endless price wars, they may not be able to compete if they exhaust too much resources.
Title
In fact, it’s not just Tesla who is preparing for the winter.From January to September this year, domestic sales of new energy vehicles reached 4.567 million units, an increase of 110% year-on-year. However, in this 110% growth, except for BYD which is leading the market and the medium and low-end electric vehicle market that has exploded this year, the market of price range 200,000 to 300,000 RMB is not as hot as the new car releases and new brands appearing in this field.
Not only Tesla adjusts price to achieve a 50% growth rate target, but also our familiar NIO has not achieved a qualitative breakthrough in sales due to the increase of new products. More just completing the iteration of self-new and old models; and those new-new forces that have not yet seen cars, their days starting from scratch are even harder.
The reason why the coldness spreads to everyone is that the cold wave has already arrived.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.