Author: Lu Weijia
Faced with the pressure of order volume, Tesla had to adapt to the characteristics of the Chinese car market – price reduction.
Before the end of the new energy vehicle subsidy, Tesla once again pulled out the price butcher knife.
This morning, Tesla officially announced that the prices of the Model 3 and Model Y models sold in mainland China have been adjusted, with price reductions ranging from 14,000 to 37,000 yuan.
The price adjustments are as follows:
The price of the Model 3 rear-wheel drive version has been reduced from RMB 279,900 to RMB 265,900, a reduction of RMB 14,000.
The price of the Model 3 performance version has been reduced from RMB 367,900 to RMB 349,900, a reduction of RMB 18,000.
The price of the Model Y rear-wheel drive version has been reduced from RMB 316,900 to RMB 288,900, a reduction of RMB 28,000.
The price of the Model Y long-range version has been reduced from RMB 394,900 to RMB 357,900, a reduction of RMB 37,000.
The price of the Model Y performance version has been reduced from RMB 417,900 to RMB 397,900, a reduction of RMB 20,000.
Without a doubt, this is the largest price adjustment that Tesla has made this year. The price has not been lowered for a long time since the surge in battery costs and chip shortages. This raises a question: the fluctuation of prices for Tesla’s models is changing based on changes in manufacturing costs. Nowadays, with the dramatic increase in costs for essential components for new energy cars, why did Tesla reduce its prices at this critical juncture?
The fundamental reason is that Tesla’s recent order volume in Mainland China has dropped significantly. Even during the peak season of the traditional car market, Tesla’s store traffic and order volume are unsatisfactory. Therefore, in order to maintain its current sales volume, Tesla had to adapt to the characteristics of the Chinese auto market and reduce the price.
After this price adjustment, Tesla will undoubtedly see a surge in order volume, and no longer needs to worry about shrinking sales volume.
In fact, Tesla has already “quietly” reduced its prices due to the drop in order volume some time ago. It’s just that the way of lowering prices was relatively subtle, only providing subsidies on the level of purchasing insurance for new cars. This is why Tesla emphasizes in the price adjustment poster that the discount cannot be combined with insurance subsidy benefits starting from October 24th.
So why has Tesla seen a significant drop in order volume? With more and more domestically-made new energy car models in the 200,000-400,000 yuan price range, Tesla’s market share has been eroded or Tesla’s attraction to the market has become weaker.When faced with a price tag of over 300,000 RMB, would you choose the all-in-one, easy-to-drive, intelligent and luxurious XPeng G9, or the Tesla Model Y with no tactile feelings and nothing special?
The people are wise, and it is obvious that the larger, more comfortable, and smarter XPeng G9, which has a more intelligent cabin, is more in line with Chinese consumers’ preferences for cars. Of course, this doesn’t mean that the XPeng G9 will be more popular than the Tesla Model Y, but rather that XPeng G9 represents Chinese domestic new energy automobile manufacturers who understand the Chinese car market the best.
The Tesla Model Y not only competes with other vehicles on the Chinese market, but also with XPeng G9, BYD Tang, Ideanomics L8, NIO ES6, and AVITA 11. Faced with the fierce competition in China’s new energy market, Tesla has no choice but to enter the fray.
However, Chinese domestic automakers should not underestimate the competition from Tesla, as Tesla is actually taking proactive measures to fight back. In fact, a price of 265,900 RMB is far from Tesla’s bottom line.
A few days ago, Tesla CEO Elon Musk revealed information about Tesla’s next-generation platform during Tesla’s Q3 2022 earnings call.
It is certain that electric vehicles built on the new platform will have a smaller body size compared to Model 3/Y, and will have a cost of production that is only half of Model 3/Y, and a production capacity that is even higher than the sum of all vehicles currently available for sale.The arrival of Tesla’s third platform will help the company expand its market scale, and the lower cost will also help Tesla seize the low-end market. This also confirms the rumors from the past two years that Tesla will launch an electric car priced at around $25,000.
It seems that the idea of Chinese consumers buying a Tesla for less than 200,000 yuan is not a dream.
As for the specific release time of the new platform, Musk said that there is currently no specific release time. According to foreign media speculation, given that Tesla’s electric pickup truck Cybertruck and truck Semi have not yet entered the mass production stage, the release of the new model will be no earlier than 2024.
In other words, in two years’ time, competition in the new energy vehicle market will become more intense, as Tesla’s pricing cuts trigger the “shark effect” and once again promote the development speed of the industry. By then, traditional automakers who have not yet adapted will once again face survival pressure.
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.