Yesterday, Huxiu released an article revealing that Tesla will definitely lower prices before the end of the year.
This has sparked rumors about Tesla lowering prices, leaving people wondering whether or not Tesla will actually do so, when they will do it, and why their prices change. This article aims to answer these three questions.
Tesla is Hurried
In October, the Tesla Shanghai factory produced 87,706 cars, but only delivered 71,704.
This resulted in a deficit of approximately 16,000 vehicles–Tesla’s first ever case of supply exceeding demand. The company’s anxiousness was evident.
On October 24th, Tesla officially lowered the prices of two of its best-selling models, the Model 3/Y, by RMB 14,000 to 37,000. This is no small sum.
On November 8th, Tesla also offered subsidies of RMB 4,000 to 8,000 for insurance.
A double punch of price reductions and subsidies. Just how many customers did Tesla capture with this combination?
I’m not a Tesla employee, so I don’t have that data. However, wise as I am, there is still a way to judge whether Tesla’s supply-demand deficit has been reversed.
We can indirectly judge the supply-demand deficit by looking at changes in Tesla’s delivery cycle.
After the October price drop, Tesla changed the delivery time for its Model 3/Y to 1-2 months, with delivery completion scheduled for the end of the year.
As of November 23, 2022, the official website shows a delivery period of 1-5 weeks, still scheduled for completion by the end of the year.
What does this mean?
It means that the Tesla Shanghai factory has sufficient capacity to ensure that it will deliver Model 3/Y by the end of the year. This is not particularly good news for the supply-demand deficit.
Is a Deficit a Big Problem?
Recalling how, in the past, the United Kingdom waged war in order to reverse its trade deficit with China…
From the data alone, Tesla’s October production and sales were indeed in a state of deficit. It seems that Tesla’s strongly dominated seller’s market, with too much demand and too little supply, has become a buyer’s market with too much supply and too little demand.In fact, the situation is not so pessimistic. Tesla’s sales are still steady and it holds a leading position in the market.
However, Tesla has more cards in hand than the “British Empire”.
Simply looking at the price reduction, starting from Model 3 entry-level model with a yearly gross profit of over 20%, the price can be reduced to 220,000 yuan, which is still profitable.
Through such a strong price reduction promotion and with Tesla’s market appeal, the 16,000-unit production and sales deficit can be instantly wiped out, and even the production capacity may once again experience a deficit.
Will there be a price reduction before the end of the year?
Will Tesla reduce its price before the end of the year?
Consumers who are watching closely and even those in the industry are eager to know the exact news.
Based on the information I have, the possibility of Tesla directly lowering its price before the end of the year is low, but it is highly likely that it will introduce some “methods” similar to the effect of price reduction.
The core information here is that the subsidy for 2023 will be officially cancelled, and if Tesla does not reduce its price, the terminal selling price will automatically increase.
Therefore, reducing prices or similar promotional methods have become imperative.
Conclusion
As a leading company, Tesla’s product price changes and related preferential policies will affect the prices of a series of market competitors in China. Tesla’s price reduction and insurance subsidies have attracted a series of more competitive counterattacks from domestic car companies.
Last year, there were not many direct competitors to Model 3/Y in the same price range.
But this year, there are more and more products competing with Model 3/Y, and they have clearer and more refined user profiles, with higher cost performance and battery life ratios.
Tesla’s product power and brand influence are being diluted in the constantly intensifying Chinese market.
So, do you think Tesla will have a price reduction within the year? Share your thoughts in the comment section.
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.