Tesla under 200,000 yuan is coming Why is the crazy price cut?

Tesla, which was the first to raise the butcher knife in the global market, continues to "chop" on price.

On April 4, according to 36Kr, Tesla is building a low-priced model, which can be seen as a small Model Y, for which Tesla is building an annual production capacity plan of up to 4 million vehicles. According to a Tesla supply chain company, whether the low-priced model is a hatchback or an SUV has not yet been determined, and it is expected to be launched in 2025.

In this regard, Tesla did not give a market response, but the industry first heated the discussion.

Currently, Tesla's cheapest model is the Model 3. At the beginning of this year, with Tesla's price war, the price of Model 3 was as low as 229,900 yuan, the lowest price in the history of domestic Tesla. And now, models with a lower price than this are being developed. The outside world is curious, although it is a "master" of cost control, how cheap can Tesla be?

"City" noted that after Tesla started its price reduction strategy, its gross profit margin fell from 32.9% in the first quarter of 2022 to 25.9% in the fourth quarter, but this figure was still higher than BYD's gross profit margin of 22.8% in the same period.

In addition, on April 3, Tesla released its global production and delivery report for the first quarter of 2023, showing that Tesla produced about 440,800 electric vehicles worldwide in the first quarter, a year-on-year increase of 44.3%; Cumulative delivery of about 422,900 new vehicles, a year-on-year increase of 36%, breaking Tesla's quarterly delivery record.

But this report card does not seem to be recognized by the capital markets. On the day, Tesla's stock price fell 6.12% to close at $194.77 per share, and its market value lost $40.1 billion, or about 270 billion yuan. In the following two days, the company's share price continued to fall. As of the close of trading on April 5, it closed at $185.52 per share.

Although electric car manufacturers were generally hit hard in the U.S. stock market on Wednesday, sources said that in the case of Tesla, this may be related to the market and investors' concerns that a "price war" will erode the company's future profit margins. In addition, UBS expects that automotive companies will face sales challenges while expanding production capacity in 2023.

Kill into the hinterland of BYD

The news in the market about Tesla's upcoming low-priced model has been around for a long time.

As early as 2020, Tesla CEO Musk mentioned on "Battery Day" that by 2023, self-driving electric vehicles priced at $25,000 (about 170,000 yuan) will be possible.

Then, at the investor event in early March this year, Tesla once again said that the manufacturing cost of the next generation model will be reduced by 50%. Some industry insiders estimate that the price of Tesla's new model will drop to more than 100,000 yuan.

Some time ago, Tesla's biggest competitor BYD just said that it has pricing power in the price band of 100,000~200,000 yuan. Now, Tesla has revealed that it wants to make low-priced cars below 200,000 yuan, which seems to rob BYD's business.

However, Tesla plans to achieve an annual production capacity of 4 million vehicles in the future low-priced models, is this good to achieve?

In order to cope with the sharp increase in sales brought about by the launch of low-cost cars, Tesla has continued to expand production capacity around the world. On March 2, Tesla announced at its Investor Day event that it will build a new vehicle plant (Monterrey Plant) in Nuevo León, Mexico, which is also Tesla's third overseas plant.

Mexican diplomats have previously said the Monterrey plant will invest more than $5 billion and cover thousands of acres, about twice the size of Tesla's Texas Gigafactory, which is used to produce Tesla's next-generation platform models.

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As Tesla's first overseas factory, the Shanghai Gigafactory started construction in January 2019 and was delivered at the end of that year. Since then, Tesla has repeatedly expanded and upgraded its production lines to the Shanghai Gigafactory, and currently has an annual production capacity of more than 750,000 vehicles, mainly producing Model Y and Model 3 models.

Tesla's second overseas plant is located in Berlin, Germany, with an investment of nearly 5 billion euros and an annual production capacity of about 500,000 vehicles. In March, the local state environmental office announced that Tesla had applied to increase its annual production capacity from the current 500,000 to 1 million in the future.

In addition to the above three overseas factories, Tesla also has two vehicle plants in the United States that produce passenger cars, namely the Fremont Gigafactory in California and the Gigafactory in Austin, Texas. The former mainly produces four models: Model S, Model X, Model 3 and Model Y, with an annual production capacity of 650,000 units; The latter mainly produces the Model Y, with an annual production capacity of about 500,000 units.

According to 36Kr, the above five factories will undertake part of the annual production capacity task. Among them, the Monterrey plant in Mexico will be the main production capacity of this new model.

In 2022, Musk has said that Tesla may open 10~12 new factories to increase production and eventually achieve the ambitious goal of selling 20 million electric vehicles per year by 2030.

This ambition not only makes independent brands and joint venture brands in the Chinese market feel threatened, but also stirs the nerves of many century-old traditional car companies around the world who are trying to transform electrification.

According to data released by the European Automobile Manufacturers Association (ACEA), Tesla's new car registrations in EU countries reached 19,249 in February, a year-on-year increase of about 49.7%, surpassing all car companies in the EU market. During the same period, Tesla's market share is also increasing, its share of the EU passenger car market is 2.4%, up from 1.8% in the same period last year, and its share in the EU pure electric car market is 19.8%, up from 18.5% in the same period last year.

Tesla's confidence in price reduction

For many new energy vehicle companies, the price of 200,000 yuan of smart electric vehicles is a threshold. With a selling price of 200,000 yuan and achieving profitability as the goal, it is not only necessary for the enterprise to have scale, but also requires the ultimate control of costs.

Li Xiang, chairman and CEO of Li Li Auto, once said that the price of 200,000 yuan to 300,000 yuan is a greater cost challenge for car companies. He believes that with today's ideal car sales of 10,000 or 20,000 vehicles a month, it cannot be very competitive in this price range.

And Tesla is recognized as the "cost master" in the industry. In 2023, Tesla expects to produce 1.8 million vehicles worldwide, maintaining a CAGR target of 50%. But Musk says their real goal is 2 million.

This confidence comes from the sales boom caused by several rounds of price cuts for the Model Y and Model 3. Musk said that Tesla's discount policy has stimulated market demand, and future cost reduction will further improve Tesla's competitiveness and profitability.

Pete Bannon, Tesla's vice president of hardware design engineering, likened Tesla's cost-reduction process to "peeling a carrot": "Peeling will not have any effect, but repeating it will have a huge impact, such as through manufacturing methods, vertical integration and other technological innovations, Tesla's BOM cost has been reduced from $84,000 in 2017 to $36,000." ”

Some industry insiders took Tesla's third-generation platform as an example to explain how it achieved cost reduction in material selection and production process.

First, Tesla no longer uses rare earth materials. At present, there are two kinds of motors equipped with new energy vehicles, one is a permanent magnet synchronous motor (including rare earths), and the other is a non-magnetic induction AC asynchronous motor (excluding rare earths). According to the relevant person in charge of a domestic electric drive supplier, the use of rare earth permanent magnet materials, the motor efficiency can reach 97%, although the use of rare earths can only achieve 92%, but the cost can be reduced by one percent.

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Secondly, reduce 75% of silicon carbide raw materials. Taking ST's Model 3 as an example, Tesla reduced the number of SiC MOSFETs, a metal oxide semiconductor FET based on silicon carbide technology, from 48 to 12, achieving a cost reduction of nearly 10%. At the same time, the silicon carbide raw material will be reduced by 75%, and the corresponding plant floor space will also be reduced by 50%.

In addition, Tesla unveiled the "one-time assembly" car manufacturing model of the third-generation platform for the first time at the investor conference, further dismantling Tesla's "money-saving trick".

Using this model, the first is to reduce the number of auto parts and adopt integrated die-casting; The second is to decompose the body into several parts, and carry out sequential assembly and parallel assembly at the same time, that is, multi-assembly line synchronous operation; In the third step, the assembly of the whole vehicle only needs to be carried out once, which is conducive to improving the efficiency of vehicle manufacturing and can also reduce the production floor space by 40%, thereby reducing capital expenditure.

According to data, compared with the Model 3 rear underbody, the Model Y with integrated die-casting bottom is reduced by 79 parts, the number of welding joints is reduced from 700 to 800 to 50, and the weight of the bottom is reduced by 30%. Tesla CFO Zack Kirckhorn said that in 2022, the cost per vehicle of the Model 3 has been reduced by 30%.

However, the most critical saving point is on the battery.

In 2020, Musk announced Tesla's self-developed new 4680 battery. The so-called "4680" refers to the battery diameter of 46mm and the height of 80mm. According to Tesla, the single energy of the battery has been increased by 5 times, the cruising range of the whole vehicle can be increased by 16%, the power is increased by 6 times compared with the tabs battery, and the power output is increased by 6 times.

Musk said the production of the battery will make it possible to sell a $25,000 self-driving electric car.

In 2024, it is regarded by Musk as the "first year of mass production" of the 4680 battery. As a result, Tesla began preparations this year, announcing in early January that it would invest more than $3.6 billion to expand its Nevada plant, planning to expand the production of 100GWh of 4680 batteries, with a long-term goal of 1000GWh in total.

The selection of materials and the efficiency of the production process, as well as the development of 4680 battery technology, have become the strength for Tesla to reduce prices or even launch low-priced models.

However, judging from the speed at which investors sell Tesla shares these two days, it is clear that these cannot fully convince them. On April 20, Beijing time, Tesla announced that it will hold a conference call for analysts in the first quarter of 2023, which may be an important node to observe whether the stock price can rebound.

After entering the low-priced car market, Tesla needs to deal with more problems. The new energy vehicle companies led by BYD will most likely not sit still, how to strictly control quality in cost reduction, and fight this battle, Tesla also needs to be fully prepared.

Author | Liu Dongxue

Edit | Tian Yanlin