Reducing costs when others do not have technology, and reducing prices when others have technology, this is Tesla's simple but effective way to survive.
Wen 丨 Smart driving network Wang Shuoqi
Edit the | Manjiang Bing
The $100 Tesla stock may not be there again, if Musk doesn't split the stock again.
In just one month, Tesla's share price nearly doubled from around $100, and its market value soared by $240.3 billion, equivalent to 1.634 trillion yuan.
The most direct reason for the sudden reversal of emotions is the surge in sales caused by Tesla's global contrarian price cuts.
The deeper reason is that Tesla will continue to reduce prices in the future.
Why can Tesla make costs so low? How much room does it have to cut its price?
01.
Tesla's gross profit margin is 25.9%, and there is still huge room for price reduction
Two days ago (January 26, 2023), Tesla just released its fourth quarter and full year 2022 earnings report gave a relatively complete answer.
In this earnings report, Tesla can be said to be quite satisfied with its performance last year.
Tesla said: "The fourth quarter of 2022 is a record-breaking quarter, and 2022 is also a record-setting year", Tesla CEO Elon Musk mentioned in the conference call that 2022 is the best year ever for Tesla on all levels.
Financial report data shows that in 2022, Tesla achieved an operating profit margin of 16.8%, doubled its net profit, and achieved a new delivery record of 1.31 million vehicles that is unparalleled in the field of electric vehicles.
The fourth quarter of 2022 was Tesla's 14th consecutive quarter of profitability, achieving the highest single quarter earnings, highest operating income and highest net profit ever.
According to the data, in 2022, Tesla's total revenue reached $81.5 billion, a year-on-year increase of 51%; Operating income was $13.7 billion and operating margin was 16.8%; Net income more than doubled year-over-year to US$12.6 billion; Gross margin reached 25.9%.
This also means that Tesla still has more room to cut prices in exchange for increased sales.
It should be known that throughout last year, the entire industry faced an increase in raw materials, commodities, logistics, and quality assurance costs; Tesla itself is also facing challenges such as the increase in the production cost of 4680 batteries and the ramp-up of the production capacity of two new super factories, but on the one hand, Tesla has achieved a significant increase in the delivery of electric vehicles (slightly insufficient from the target it set at the beginning of the year, and lost the top spot in global new energy vehicle sales, but still maintains the first place in global sales of pure electric vehicles), on the other hand, it has achieved an unmatched operating profit margin in the new energy industry, and has been unique in the unprofitable electric vehicle market.
In contrast, Wei Xiaoli in the Chinese market, sales have not completed the KPIs set at the beginning of the year, gross profit margins have been hovering at a low level, selling one car at a loss continues, and the performance in the capital market is also poor, fortunately, the cash flow of the three companies remains around 40-50 billion yuan.
In terms of gross profit margin and operating profit alone, the 2022 financial reports of Wei Xiaoli have not yet been announced, and we select the data of these three companies in the third quarter of 2022: Xpeng's gross profit margin is 12.2%, NIO's 13.6%, and the ideal is 18.9%; In the first three quarters of 2022, the operating loss was 8.9 billion yuan for NIO, 6.2 billion yuan for Xpeng and 3.5 billion yuan for Lili.
Why is only Tesla making so much money in such a hot electric car market?
In addition to the scale effect brought by the rising sales, what is more important is Tesla's technological advantages and innovation in the manufacturing process.
Tesla has been investing heavily in innovations such as technology research and development and vehicle manufacturing, and the cost of bicycle research and development is about three times the industry average.
The return on R&D investment is directly reflected in the reduction of manufacturing and operating costs, driven by Tesla's innovative manufacturing process to achieve cost reduction and efficiency increase, in January 2023, Tesla's new model ushered in a record low price in Chinese mainland.
In addition, Tesla FSD brought in $324 million in revenue in the fourth quarter, which represents Tesla's success in the software-defined smart car business model.
In its fourth-quarter 2022 earnings report, Tesla said that FSD Beta has been deployed to about 400,000 vehicles in North America (US and Canada), compared to the previous FSD Beta deployed on 160,000 vehicles at the end of September 2022, which means that this technology has increased by 150% in three months.
In addition, it is reported that at the Tesla Investor Day event to be held on March 1 this year, Musk may announce the latest news on the next generation model platform.
Previously, in the third quarter of 2022 earnings call, Musk said that the size of the next generation model will be smaller than the Model 3/Model Y currently on sale, and the cost will be half of the existing platform.
▲Foreign media expect Tesla to launch economical electric vehicles and new models
This means that Tesla is expected to launch a 100,000 yuan electric car.
However, it should be pointed out that Tesla's conclusion of high bicycle profits is not aimed at its electric vehicle competitors, but at the top of the pyramid in the entire auto industry.
Japan's famous financial media Nikkei Shimbun reported in November last year that Tesla's bicycle profit has been eight times that of Toyota, the world's largest sales company.
Nikkei Shimbun compared the financial report data of Toyota and Tesla from July ~ September 2022, Toyota's consolidated net profit was 434.2 billion yen, while Tesla reached 454.2 billion yen, on a quarterly basis, Tesla surpassed Toyota for the first time in terms of amount. Toyota, on the other hand, is close to 8 times Tesla's sales volume. Tesla's net profit per vehicle is 8 times that of Toyota.
Although this comparison is not rigorous, it is a fact that Tesla's bicycle profits have surpassed Toyota's.
But for the electric vehicle industry, Tesla still has a lot of room to cut prices.
02.
Tesla's cost killer: 4680
Recently, Tesla said on social platforms: the mass production of 4680 large cylindrical batteries, a major breakthrough, last week Fremont, California factory produced 868,000 large cylindrical lithium-ion battery cells, can support 1,000 Model Y loading, the next may usher in mass production installation.
What is special about the 4680 battery? Compared with the previous generation of 2170 batteries, this battery has 5 times higher energy density, 16% more cruising range, 6 times higher output power, but 14% lower cost.
According to Musk in the third quarter of last year, Tesla cars use 4680 batteries, combined with materials and vehicle design improvements, production costs can be reduced by up to 54%.
As the world's largest electric vehicle manufacturer, Tesla's own research and production of 4680 large cylindrical lithium-ion batteries is expected to enter the fast lane of mass production in the new year.
On the one hand, Tesla hopes that through the new technology of 4680 large cylindrical battery, electric vehicle batteries can store more energy, last longer, and be cheaper, and eventually be used in Tesla's full range of electric vehicle products, including electric trucks and electric sports cars.
On the other hand, Tesla also hopes to use lithium iron phosphate materials to apply the 4680 large cylindrical battery to the energy storage field with broad market prospects and is expected to surpass automobile production in the future.
In order to cut the final production cost in half, Tesla has accelerated efficiency in every production process, and the Gigafactory is the top priority.
03.
Have to say super factory
Throughout Tesla's price reduction history, in addition to technological innovation, cost reduction mainly depends on the maturity of the industrial chain and production technology.
Tesla produced each car in 2017 at a cost of $84,000 (about 580,000 yuan). In recent quarters, that figure has fallen to $36,000 (about 250,000 yuan) per car.
It is important to note here that the reduction in associated costs is not simply due to lower battery costs, they are the result of Tesla's efforts to make manufacturing as simple as possible by improving the design of the car.
The integrated die casting technology, now known to the public, is one of them.
When it launched the Model Y, Tesla began using giant castings, which greatly reduced the number of parts needed to produce a car. Tesla's use of large castings has sparked a lot of attention in the industry, and automakers such as Volvo have hinted that they intend to adopt a similar strategy in the near future.
On the other hand, Tesla's new factories, such as the Shanghai Gigafactory, Berlin Gigafactory, and Texas Gigafactory, are all built specifically to optimize the production of all-electric vehicles.
The recent surpassing of the Fremont factory in Shanghai is proof that Tesla is ahead of its time with a professional electric vehicle factory concept.
Another important reason is that Tesla's domestic supply chain in China is highly mature.
When the millionth vehicle of the Shanghai Gigafactory rolled off the production line last year, Tao Lin, Tesla's vice president of external affairs, said that the localization rate of Tesla's Shanghai factory supply chain has exceeded 95%, and 99.9% of the Shanghai factory team is composed of Chinese.
Tesla's batteries, vehicle stamping dies, body parts, interiors, electronic equipment and other suppliers are basically from local brands, and domestic Tesla's battery packs are provided by CATL and Pioneer Intelligence. The thermal management system comes from Sanhua Intelligent Control, Yinlun Shares, Lingyun Shares, etc.
In general, the main body of domestic Tesla basically comes from local suppliers.
Back at the end of 2019, the local procurement rate of Tesla parts was only about 40%, which means that in three years, the local procurement rate of Tesla parts increased by more than 50%.
What does the increase in the localization rate of parts supply mean? This means that the production cost of the whole vehicle has been greatly reduced.
The Shanghai Gigafactory is located in the Yangtze River Delta region and is a dense concentration of domestic core auto parts enterprises.
According to the research report of China Automotive Technology and Research Center, among key auto parts suppliers such as engines, transmissions, power batteries, drive motors, battery control systems, and reducers, enterprises in the Yangtze River Delta account for nearly or more than 50%.
This means that the cost of material production, material transportation and customs duties will be greatly reduced by the Shanghai Gigafactory.
It is worth mentioning that according to Musk, Tesla currently has 6 factories, except for Giga Nevada or Gigafactory 1 and Gigafactory 2, the rest are often referred to as the four super factories, including the Shanghai super factory.
According to public data, of Tesla's 1.31 million delivery data in 2022, the delivery volume of the Shanghai Gigafactory is 710,000 vehicles, accounting for 54.2%, which means that the Shanghai Gigafactory is currently Tesla's largest production base.
With these factors, it's no surprise that China is the cheapest market for Tesla in the world.
03.
2023 may be even more terrifying
In 2022, Tesla's total global deliveries were 1.31 million units, an increase of 40% over 2021, ranking first in the pure electric vehicle industry. According to data from the Passenger Association, the delivery of Model Y alone has exceeded 450,000 units, which is equivalent to the sum of new car-making forces such as "Wei Xiaoli", and almost equals Tesla's full-model delivery results in 2021.
On the earnings call, Musk said: "Although the overall car market may contract, [consumer demand for] Tesla will remain good." He noted that the market demand for Tesla's electric vehicles is strong, especially after price adjustments, and the order volume reached an all-time high in January 2023, almost double the plant's capacity. This means that Tesla needs to continue to ramp up production capacity to meet high-growth demand. Tesla said in its earnings report that it expects to deliver 1.8 million vehicles in 2023.
Among these 1.8 million vehicles, there is still room for significant cost reduction, and more economical and lower-priced models will also be launched, and the tense days of Volkswagen and Toyota have arrived.
▲On January 26, 2023, Akio Toyoda said that he will resign as president and replace Takeshi Uchiyamada as president, and Tsuneji Sato, president of Lexus and racing brands, will replace him as president
Akio Toyoda's sudden abdication also seems to imply this.