The Price of Tesla Drops Again

By Zi Li from Tiexi District

Tesla has reduced the price again today: the starting price of Model 3 is now 229,900 yuan, and that of Model Y is 259,900 yuan, hitting the lowest record so far. This seems to become the only solution in this stage and set the right tone for the coming year.

After all, the unluckiest person in 2022 is Musk, and Tesla is on the brink.

In three major markets, Tesla faced challenges —

• In the European market, the problem came from slow production ramp-up at the Berlin factory. The construction had encountered frequent protests from local environmental groups, and after the operation, problems with harsh salaries, working conditions, and the environment hampered recruitment and productivity.

• In the American market, the problem lies in scandals. These include a series of issues since the acquisition of Twitter last year and allegations of widespread sexual harassment in 2021.

• In the Chinese market, the problem is competition. Unlike Europe and the United States, participants in China’s new energy market include not only large manufacturers who transformed, but also many new car-making companies. Although there is little direct competition in terms of price and positioning, the pressure on product experience and cutting-edge technologies such as batteries, charging, and autonomous driving is enormous, and its advantages are dwindling, and even disappearing entirely.

The result is that Tesla’s stock price fell by more than 60%, even raising questions that Musk’s sale of stocks and purchase of Twitter was to diversify his investment. If so, Musk might not be that unlucky after all.

The market performance is still acceptable. The 2022 sales target of Tesla was 1.5 million units, but the final official data showed that only 1.31 million units were sold. Compared with the stock price, this may not matter too much. As for 2023, based on Musk’s plan to increase annual growth by 50%, the new year’s target sales volume is expected to be about 2,000,000 units.

How to achieve this goal?

First of all, do not expect significant improvements in the external environment. At the beginning of December, the Berlin factory achieved a weekly production capacity of 3,000, which was still far from 14,000 a week (500,000 annually). In the United States, although Musk promised to leave the CEO position of Twitter, the process has been slow, and there have been recent revelations of office supply shortages and rent arrears by the bureau. Meanwhile, the competitive predicament faced in China’s market is a more fundamental problem. Once Tesla is no longer the benchmark for the industry, the consequences will be unthinkable.In fact, Tesla is still at the forefront of the industry.

In terms of batteries, the 4680 battery has finally entered mass production. At the end of last year, it achieved a weekly production of 868,000 units, which supports 1000 Model Y vehicles. The new battery has improved in terms of range and fast charging, but the most significant advantage is the 54% reduction in production costs, achieved through a combination of factors such as the battery materials industry and external factors such as vehicle design.

In terms of technology, the integrated casting process has begun to be promoted and applied. Currently, the Model Y produced at the Shanghai Super Factory all use integrated casting for the rear body. Through this technology, the number of parts, manufacturing time, workers, and robots required for this area in production are greatly reduced, and the cost is reduced by 20% according to the official statement. In the United States, Tesla has already extended the integrated casting technology to the front longitudinal beam and plans to apply it to the entire chassis in the future.

In terms of product series, in the third quarter financial report last year, Musk promised that the cost of “next-generation new cars” would be reduced to half of Model 3/Y, and production would exceed the total of existing products. However, there is still controversy over the specific definition of “next-generation new cars” in the outside world. Some people believe that it is a completely new entry-level model, and there are reports that the Tesla Model 2 will debut next year, with a starting price of only $25,000. Others believe that it will be a redesigned Model 3. Current reports show that Model 3 is indeed going to get a redesign this year.

At the same time, Tesla’s mysterious government relationship is also continuing to bring them good news. The new law signed by Biden last year canceled the limit of 200,000 vehicles for new energy subsidies, and the law officially takes effect from this year. Now, Tesla enjoys the same subsidy amount as competitors in the US market.

Of course, there are a series of cost reduction measures that enable Tesla to have greater room to maneuver in the face of market competition. In the just-passed fourth quarter of 2022, Tesla used price cuts to stimulate sales. Today’s price cuts, especially after the new energy subsidies have been reduced, contrast with most other new energy brands, including BYD, which are trending upward. Undoubtedly, Tesla’s large price cuts have put enormous pressure on other automakers. So in 2023, the theme is likely to continue to be a price war.## About Tesla’s 2 Million Sales Target and the Need for Innovation

There is still a great opportunity for Tesla to achieve its goal of 2 million sales by 2023. However, for Tesla at this point, sales are not the most significant thing. Tesla urgently needs new innovations to maintain its industry position.

Firstly, the scandal crisis in the United States that caused a huge controversy has not been genuinely resolved, and the prospect of whether Musk will continue to serve as Twitter CEO is unclear. More importantly, even though Tesla is still at the forefront of the industry, it is no longer as iconic as it used to be.

Looking back at Tesla’s recent technological innovations and upcoming new products, whether it is the 4680 battery, integrated die-casting technology, or this year’s planned new cars, their main innovative focus is to reduce costs (of course, we do not deny that this is also one of Tesla’s trump cards). Since promoting the Model Y and establishing a virtual concept of the future’s leading giant, Tesla seems to have used all its energy to focus on production and cost structure transformations. It has been a long time since it has achieved groundbreaking achievements in cutting-edge technology.

Thinking back to what Tesla used to be, they had independently developed chips that led the world in computing power; their intelligent driving technology was the earliest mature application implemented, they integrated all keys onto one touch screen, and discarded the meaningless front air intake of EVs.

At that time, Tesla was not only at the forefront of industrial innovation but, more importantly, they could always bring staggering innovations in cutting-edge technology, product definition, and styling design. These innovations were preached and directly communicated with users, defining the market with every move.

Sales targets, profit goals, and new product launches are all for the capital market. The ability to be revolutionary, radical innovation, and define the industry are what consumers care about.

Tesla, which was once standing at the peak of the entire industry’s frontier, not just the forefront, was never a non-controversial company. Let alone an easy ride, it was always despised and questioned by the capital market because of its successive losses, production hell, and unconventional operations. However, at that time, though being questioned by the capital market, Tesla could lead its consumers to redefine EVs. Since becoming profitable, Tesla seems to have fallen into obsession with soaring profits, continuous cost reductions, and pleasing financial reports, but have lost their industry-leading edge.#### Tesla’s Recent Crisis: From Angry Youth to Greasy Old Men

When was the last time Tesla made a major breakthrough in the field of intelligent driving? Many people probably can’t remember. Recently, when they talk about automatic driving, all they emphasize is how much profit will come from software fees, showing a full flavor of Wall Street.

In the previous capital market crisis, the main promoters were opponents within the industry and short sellers on Wall Street. However, this time, the source of Tesla’s crisis is actually the consumer market. Sexual harassment scandals and Twitter controversies on the one hand, and the lack of product innovation on the other, have brought about a completely different crisis. Tesla is transforming from being a company for angry young people to one for greasy old men.

The sales target for 2023 can certainly be achieved, but the question is, what does this really mean?

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.