Tesla: Grab the market regardless of gains and losses

Wen 丨Peng Suping

Editor丨Li Qin

In exchange for the market at a low price, profits will inevitably come under pressure, and Tesla is no exception.

In the first quarter of this year, the electric car leader cut prices on a large scale around the world, which brought a record high in sales, but also triggered unsatisfactory financial data.

Compared with the fourth quarter of last year, Tesla's average selling price fell 10% in the first quarter, and 422,800 new vehicles were delivered in the quarter, up 36% year-over-year and 4% sequentially.

In terms of financial data, its total revenue in the first quarter was $23.33 billion, a year-on-year increase of 24%, but because the cost of sales did not fall in tandem with the selling price, Tesla's gross profit margin in the first quarter also fell to 19.3%, almost the lowest level in nearly two years.

Part of Tesla's first-quarter earnings report

As a result, profit also failed, with US$2.51 billion in the first quarter, down 24% year-on-year and 32% sequentially; The decline in free cash flow was particularly pronounced, with just $440 million in the first quarter, a sharp decline of 80% year-over-year and lower than when sales fell in the second quarter of last year.

Obviously, selling cars at a discount has put a lot of pressure on Tesla's financial performance.

The decline in these figures was expected by the market, but the magnitude exceeded expectations, such as the gross margin of car sales, Tesla has fallen from nearly 30% at its peak last year to 18%, and it is very likely that it has lagged behind the emerging giant BYD in the new energy automobile industry. The day after the earnings report, Tesla's stock price fell 9.75%.

But that didn't intimidate Musk. At the analyst conference after the earnings report, the Tesla helm firmly stated that driving higher sales and larger fleets is the right choice compared to lower sales and higher profit margins.

In the global macroeconomic downturn, Tesla has set a delivery target of 1.8 million or even 2 million vehicles for 2023. How to achieve this, Musk's strategy is clear, "even if it is zero profit, it is necessary to ensure current sales." ”

Price cut, Tesla's combo

Tesla's round of price cuts is the largest in the past two years.

Taking the Chinese market as an example, on January 6 this year, Tesla Model 3 and Model Y double-clicked through the previous reserve price, and the price fell by 2-48,000, which is equivalent to a percentage of 6%-14%.

The data released by the earnings report also reflects this level. In the first quarter, Tesla's bicycle revenue (excluding points and rentals) was $47,000, down nearly $5,000 or about 10% from the previous quarter.

In terms of effect, this price reduction can be described as immediate, Tesla delivered 422,800 new cars in the first quarter, a year-on-year increase of 36%, and a month-on-month increase of 4%, once again hitting a record high. In the Chinese market, where the competition for new energy models is the most fierce, Tesla also sold 137,400 new cars in the first quarter, a year-on-year increase of 27%.

But also because of the price reduction and volume, the increase in sales has not been efficiently transmitted to the revenue side. As a result, Tesla's gross margin on car sales fell to 18.3% in the first quarter, which is almost the lowest level in Tesla in the past three years.

Compared with a sharp increase in sales of 36%, Tesla's first-quarter car sales revenue (excluding points and leases) was $18.878 billion, an increase of 21.6% year-on-year, while it fell 6.7% month-on-month - this is another sequential decline in car sales revenue after the second quarter of last year, but that time was mainly due to higher prices and lower sales.

Fortunately, affected by the decline in downstream demand, the cost side has also begun to adjust, and the price of lithium carbonate fell by more than 60% in the first quarter, which also provided a cushion for Tesla's sharp price reduction to a large extent. The data shows that Tesla's cost per bike fell by $1,100 in the first quarter of this year.

Moreover, Tesla still has a lot of back hands. In the Chinese market, Tesla's facelifted model Model 3 will be launched in the third quarter, and supply chain sources told 36Kr that Tesla still has a decline of about 10,000 yuan on this model. In addition, the Model Y facelift is also advancing in tandem and is expected to be launched next year.

When it comes to why Tesla has continuously cut prices, Musk has bluntly said, "Many wealthy critics do not understand that the demand for scale is limited by affordability." There is a lot of demand for Tesla's products, but if the price exceeds people's affordability, then the demand is meaningless. This statement almost directly addresses the global economic reality of weak consumer purchasing power.

In contrast to Tesla's firm choice of price reduction to obtain the market, domestic new car companies insist on not reducing prices to obtain brand stability, but the sales situation is already quite critical.

Grab the market without counting gains and losses

From the perspective of market trends and Tesla's competitive strategy, Tesla is very likely to further reduce prices this year.

Shortly before the release of the first quarter earnings report, Tesla launched a new round of discounts in the United States, this time Model 3 and Model Y price reduction of about 2-3,000 US dollars, the range is still not low, Model Y prices are said to have fallen by more than 20% from the beginning of the year.

Tesla also warned in the earnings conference that the lower limit of the gross margin of 20% needed to be lowered.

In fact, the downward trend on the cost side has been very obvious, lithium prices have fallen below 200,000 yuan / ton, compared with last year's high has fallen by about 70%, the supply and demand pattern has not seen significant changes, in theory Tesla still has room to adjust prices;

The performance of downstream demand will also force Tesla to make new decisions. Feedback from the terminal shows that the current order reserve of Model Y is still quite sufficient, but the demand for Model 3, which was launched earlier, is relatively low. 36Kr has also previously learned that at the end of March this year, the first phase of the Shanghai factory's production line for Model 3 production was briefly suspended.

In China, Tesla's second largest market, the competitive landscape of electric vehicles is particularly fierce, and Tesla has cut prices here, which quickly triggered a follow-up of players in the same price segment. At the beginning of this year, it was Tesla, BYD and other leading companies that set off the most crazy wave of price cuts in this market.

In such a market environment, price reduction is clearly no longer a simple data game. According to 36Kr, Tesla China's attitude towards continuing to reduce prices in China does not seem to be positive, and it is reported that Zhu Xiaotong and other Tesla global executives have recently returned to Shanghai, and said in internal communication that they hope to maintain prices as much as possible and "go overseas." ”

And even if the price is not reduced, Tesla has a number of other cards in its hands, such as the Cybertruck, which will be delivered in North America this year, and tracking data shows that the current order volume of Cybertruck has been about 1.4 million. 36Kr learned that the Tesla team has put a lot of energy into the delivery of this model this year.

In addition to vehicles, Tesla is also nurturing new businesses such as FSD and charging, which is also an important part of Musk's all-out promotion and completion of the business puzzle.

Musk said in the earnings conference that the groundwork is now being laid to deliver a large number of cars at lower profit margins, and that vehicles will be able to generate significant profits over time through autonomous driving.

In addition, Tesla is also developing more business in terms of charging infrastructure. It is said that 50% of charging facilities in Europe are already open to other electric vehicles, and will continue to be promoted in North America and China in the coming quarters.

In any case, Tesla has already laid a battle book to the market with a "net profit" attitude, and the industry leader has determined to occupy more territory in the existing market. The battle is undoubtedly bloody, but players in the Chinese market may have to join the battle - head-on or flanking.