Author: Dianche Sen
On July 30th, Tesla announced a price reduction for the Model 3 Standard Range Plus upgrade version, with a subsidized selling price of only 235,900 yuan, a decrease of 15,000 yuan compared to the previous price. Tesla officials stated that this price reduction reflects the fluctuation of costs. According to reliable sources, the new car is equipped with domestic electric motors and lithium iron phosphate batteries, resulting in a significant cost reduction.
“Numb.”
“Step by step towards an electric Corolla.”
“I can’t pay off my loan as fast as you guys lower the price.”
After seeing the news, many Tesla owners commented this way.
Since starting production in China in October 2019, Tesla has lowered its price several times from the initial 355,800 yuan to the current 235,900 yuan.
In less than two years, the price has dropped by as much as 119,900 yuan. And the phrase “You can never buy the cheapest Tesla” is becoming more and more understandable.
Reasons for the price reduction
If you have an impression of the last time Tesla lowered its price, then this reduction in the price of Model 3 is not surprising.
On July 8th, the highly anticipated Model Y Standard Range rear-wheel-drive version sold for only 276,000 yuan, which was 25,000 yuan more expensive than the Model 3 Standard Range rear-wheel-drive version (before the price reduction), but the range was increased by 57km, and the space and motor parameters were also larger. Moreover, it added features such as a heated steering wheel, electric adjustment and heating for the rear seats, 7 additional speakers, LED front fog lights, single-color ambient lighting, rear privacy glass, and car purifier, and even won the title of “the most cost-effective Tesla.”
In this case, if Model 3 continues to maintain this price range, it is clearly at a disadvantage. In order to continue its “ironclad” sales, Model 3 can only reflect higher cost-effectiveness and form a mismatch with Model Y.
Data shows that Model 3’s total sales in the first three months of this year were close to 59,400 units. However, in April, due to the impact and subsequent fermentation of the Shanghai Auto Show rights protection incident, the monthly sales plunged by 67%, with only 11,671 cars delivered. Also, due to the sales decline in the past three months, Tesla’s total domestic sales in the second quarter of 2021 were 61,700, a decrease of 10.87% compared to the previous quarter.
Many customers who originally intended to purchase a Tesla have opted to wait and see, while those who have already paid a deposit have chosen to postpone delivery. This has led to a surge in inventory for Model 3, and Tesla can only solve the problem of inventory backlog at its Shanghai factory through a large volume of exports.
In April of this year, 14,174 Model 3 units were exported, followed by 11,527 units in May. In June, as market sentiment improved, exports fell to 5,017 units, but the inventory risk remained high. Overreliance on exports will greatly impact Tesla’s unit profit. In addition, Tesla’s expected sales volume for the entire supply chain is difficult to achieve.
Under these circumstances, only more affordable prices can dispel consumer doubts and strengthen their beliefs. Tesla’s motivation for lowering the price due to sales pressure has been validated. In other words, this price reduction for Model 3 is a strategic and aggressive move.
Who is under the most pressure
In this fierce battle, if one side takes the initiative to lower prices, the other side will seem more passive.
Last time, after the Tesla Model Y Standard Range RWD with a price of 276,000 yuan was released, it pointed the way for many potential consumers of mid-to-high-end pure electric vehicles.
For consumers who were considering reserving the MUSTANG MACH E or the JiKe 001, after seeing the news, they immediately reserved the Model Y.
For consumers who were hesitating between the NIO ES6 and the Model Y Long Range AWD version, after seeing the news, they immediately reserved the Standard Range Model Y.
For consumers who were comparing the Geely P7 and the Han, after seeing the news, they immediately reserved the Model Y.
Even customers who had reserved the Model 3 switched to the Model Y.
So, after 22 days of Model Y bullets flying, who will finally be hit by this 1.5 thousand yuan bullet of Model 3?
Unlike the public discourse surrounding Tesla’s previous price reductions, this time people are not talking about the “leek effect” or “brake failure”, but rather focusing on the new forces in the domestic auto market. After all, in recent years, these new forces have fired quite a few shots, and even as “new recruits”, they cannot avoid going to battle with their “opponents”.
# Three Major Players in China’s New Energy Vehicle Market – NIO, XPENG, and LI
In the past few years, the three major players in China’s new energy vehicle market – NIO, XPENG, and LI – have launched only a few mass-produced models. However, their prices have remained stable since their release. Recently, the LI ONE underwent a facelift with a slight increase in price and significant improvements in configuration. If NIO and LI have been fortunate enough to avoid direct competition with each other due to their different vehicle positioning, then XPENG’s P7 is undoubtedly a member of the vanguard.
At the same time, XPENG’s P5 (priced at 160,000-230,000 RMB), which was only announced for presale during the recent car exhibition in the Guangdong-Hong Kong-Macau Greater Bay Area, may soon join forces with its big brother, the P7, to battle with Tesla’s Model 3. Considering the development trend of the Model 3, the two vehicles will surely meet each other on the battlefield many more times in the future.
In addition, BYD Han is also a strong competitor in this price range. Soon after the release of XPENG’s P5, BYD Han launched its first “attack.” On July 31st, BYD Han EV officially added a standard range deluxe version with a post-subsidy price of 209,800 RMB. The Han EV standard range deluxe version is almost identical in configuration to the long-range deluxe version, with the main differences being battery capacity and range. The Han EV standard range deluxe version has a range of 506 kilometers, while the long-range deluxe version has a range of 605 kilometers.
The mid-range Model 3, which is also equipped with lithium iron phosphate battery, has a range of only 468 kilometers. In comparison, the Han EV has a longer range at a lower price of 209,000 RMB, providing a significant advantage.
However, the fact that BYD has launched a lower-priced Han EV is not solely due to Tesla; the vehicle had already been approved by the Ministry of Industry and Information Technology before Tesla’s price cuts. This means that BYD had plans to release a lower-specification model, but it may also be a response to Tesla’s frequent price cuts.
Of course, if Tesla plays the role of catfish in China’s new energy vehicle market, then it may be a hungry shark waiting to feast on the country’s traditional fuel and hybrid vehicle market.
In the group of gasoline and hybrid models of the same level, after the price reduction, the Model 3 is only 20,000 yuan more expensive than the Accord Hybrid and Camry Hybrid, and is comparable in price to models such as the Volvo S60 and Cadillac CT5, but it has an absolute advantage in space, handling, and driving economy. Even if this group of potential car owners have a strong aversion to pure electric vehicles, with the improvement of the cost-effectiveness of pure electric vehicle models, the improvement of intelligence, and the improvement of peripheral charging conditions, it is difficult to say which day they will turn to pure electric vehicles.
Moreover, at present, joint ventures are very passive. Due to the shortage of chips, many joint venture cars are very good in terms of retail but have low production, resulting in a situation where retail is higher than wholesale. Tesla’s price reduction this time indicates that Tesla’s supply chain capability is stronger than that of joint ventures. Everyone is short of chips, but Tesla’s production is not affected.
With the electrification transformation “flag” of various traditional car companies and the continuous improvement of Tesla’s localization, it is not ruled out that they will play the price reduction card again to further grab market share in the future, so the adjustment time left for traditional car companies is already running out.
Cui Dongshu, secretary-general of China Passenger Car Association, said that the downward price of new energy star models is an accelerated replacement of the wider gasoline car market and an accelerated process of the world’s new energy vehicle transformation. As Shanghai Gigafactory is positioned as Tesla’s main automobile export center, this further enhances China’s competitiveness in manufacturing new energy vehicles in the world.
When Can I Buy Model 3?
In fact, each time Tesla has new car and price adjustment dynamics, similar search volumes for related questions such as “when will Model 3 be discounted” and “can Model 3 be bought now” are not low.
Let’s go back to October 2019. At that time, the domestic Tesla Model 3 Standard Range version was officially released with a price of 355,800 yuan. Compared with the imported version, the domestic Tesla Model 3 did indeed have a lot of room for price reduction.
Two months later, in December 2019, Tesla began to lower prices, and that time, the price of Tesla Model 3 after subsidy was reduced to 331,000 yuan.
In January last year, Tesla again made a downward adjustment to Model 3, and the price was brought down to below 300,000 yuan, reaching 299,000 yuan. Then, surprisingly, in April last year, Tesla once again adjusted the price after subsidy to 271,550 yuan. By October last year, the subsidized price of Model 3 was lowered to 249,900 yuan, directly breaking the 250,000 yuan barrier.From October 2019 to now, the price has been reduced five times in the past 22 months, which means the price is lowered on average once every four months. Therefore, we can estimate the next time of price reduction.
Of course, this is just a probability result based on past price reduction rules, and whether it is a coincidence or a regularity, there may be an answer by searching on Baidu “Investment cycle of novices”.
However, whether it is “early buying for early enjoyment” or “waiting for a price drop forever,” the choice is still in our own hands.
In conclusion
In fact, the topic of Tesla’s price reduction has become a cliché. Gradually, consumers can expect that Tesla will reduce its price crazily sooner or later, and at least have a basic idea. In addition, as mentioned earlier, more consumers are no longer blindly “criticizing” and “protecting their rights” for Tesla’s price reduction attitude. Instead, they hope that domestic automakers can face this sudden blow not “at a loss” and “at the mercy,” and when facing this situation, they can pick up their strength to retain their part of the original users.
At that time, no matter who Tesla’s butcher’s knife targets, we will have the confidence to say to it, “Come over here!”
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.