Blunt, Tesla's "price butcher's knife"
Original debut | Golden Horn Finance
Author | Corgi's Ke
On January 12, Tesla's official website in China was updated to adjust the prices of the Model 3/Y rear-wheel drive version and long-range version, ranging from 6,500 to 15,500 yuan.
It's just that compared with the bloody rain and bloody wind last year, Tesla's price reduction this time is a little unfazed, whether it is investors, industry practitioners, or ordinary consumers, it seems that they have become accustomed to the situation of price reduction in the car market.
There are various signs that Tesla has begun to be eaten by the price war launched by itself, and Tesla, which has no obvious advantages in its products, is falling into the quagmire of the price war in the Chinese auto market.
Return to the Iron Throne
Tesla's top priority is to stabilize the "decline" in the first quarter of this year and return to the "Iron Throne".
On the evening of January 2, Tesla released its annual sales volume for 2023, which just completed the 1.8 million required by Musk. Among them, 484507 units were delivered in the fourth quarter, 483173 units were estimated, and 476777 units of the Model 3/Y were produced and 461538 units were delivered. For the full year of 2023, vehicle deliveries increased by 38% year-on-year to 1808581 units.
According to the data released by BYD, its pure electric vehicle sales in the fourth quarter of 2023 will be 526,400 vehicles, and the annual pure electric vehicle sales will be 1,574,800 units. This data shows that BYD surpassed Tesla in pure electric vehicle sales in the fourth quarter of 2023 and became the world's largest pure electric vehicle manufacturer.
As early as the third quarter of last year, BYD had a tendency to catch up, and in the third quarter of last year, BYD achieved a total of 431,600 pure electric vehicle sales, an increase of 23% from the second quarter, and the gap with Tesla was only less than 3,500.
In other words, Tesla's current passive situation is not a performance fluctuation caused by unexpected events, but an inevitable manifestation of internal logic.
The involution of China's auto market intensified last year, which objectively accelerated the product iteration and upgrading of major brands. Compared with other new energy brands at the same price, Tesla's mainstream sales models can be called "rough houses" in terms of configuration, and it is difficult to say that they have obvious advantages in product strength.
In the second half of last year, after a number of competitors adapted to the rhythm of the "price war", domestic new energy sources such as BYD and Ideal have gained a firm foothold, and brands such as Xiaopeng have also stopped the decline and walked out of the crisis, which has caused the diversion of Tesla's products to a certain extent.
In the third quarter of last year, Tesla experienced an overall decline in key data such as gross profit margin and net profit, and Tesla's revenue for the quarter was $23.35 billion, lower than analysts' expectations of $24.06 billion. Net profit for the quarter was $1.853 billion, down 44% year-on-year. Its gross margin has slipped to 17.9% in the third quarter, compared with 25.1% in the same period last year.
In terms of the consumer market, in the third quarter of last year, the effect of Tesla's price reduction strategy to promote sales was greatly weakened. Even after another round of price cuts in August, sales and profits still performed poorly. Tesla's sales in the third quarter were only 435,000 units, down 6.7% from the previous quarter, ending five consecutive quarters of sales growth.
Xiaoqiang who can't be killed
Tesla believes that the most effective way to change the internal logic and trend of this decline is still the tried and tested "price war", after all, it still has room to reduce prices, and the gross profit margin of 17.9% is its largest capital.
However, after the practice of the past year, the price war set off by Tesla failed to kill the final suspense of the game.
For car companies, in the case of poor operating conditions, there are three ways to fill the capital gap: price reduction promotion, financing and asset sales.
In the stage of price war in the industry, there is a risk that the gross profit margin will be further pressured or even negative, and the sale of assets such as factories is easy to cause fluctuations in cost control, and it is difficult to further deteriorate the operating conditions of enterprises only by financing the circle of money.
However, the difficulty of financing money lies in the capital market's expectations for related enterprises and industries, and new energy vehicles will inevitably shake the confidence of the capital market under the influence of price wars.
According to the established script, car companies like NIO, which once faced a funding gap of 30 billion yuan, will inevitably struggle last year.
However, the development of facts tells Tesla that even if domestic new energy fails to stand on the capital outlet, it can still find Middle Eastern tyrants to save the scene through flashing operations.
On June 20 last year, NIO announced that it had signed a share subscription agreement with CYVN Holdings, an Abu Dhabi investment institution, which will make a total strategic investment of about US$1.1 billion in NIO.
On December 18 last year, NIO announced that it had signed an agreement with CYVN Holdings, an Abu Dhabi investment institution, which would make a strategic investment of about US$2.2 billion in cash to NIO through its subsidiary CYVN Investments.
Like Xiaoqiang, who can't be killed, NIO "escaped" under Tesla's price butcher's knife.
On June 9 last year, AVATR released a capital increase plan, with a total amount of no more than 4 billion yuan, and a few days later, on June 13, VOYAH announced that it had obtained a joint credit of 15 billion yuan from six banks, including the Industrial and Commercial Bank of China and the Bank of Communications.
As for Xiaopeng, Leap and other car companies, they have also found financing channels in the follow-up time. Among the frequent customers who entered the sales list of various new energy vehicles, only Weimar was finally "swept to death".
It can be said that Tesla's gross profit margin of up to 17.9% not only failed to defeat the dazzling financing methods of domestic new energy, but also made a number of domestic new energy products "resistant" to the price war.
Passive follow-up
Compared with the initiative to launch a "price war" at the beginning of last year, Tesla this time can be regarded as a passive follow-up.
Major car companies have almost continued last year's price war strategy, and actively launched various promotional activities at the beginning of the new year.
On January 1, the official guide price of Lynk & Co 09 MHEV was lowered by 10,000 yuan, and the latest guide price is 247,900-302,900 yuan, and a new car purchase gift was launched, and the car purchase before January 31, 2024 can enjoy 10,000 yuan fuel vehicle purchase coupons, up to 8,000 yuan replacement subsidies and 10,000 yuan financial subsidies.
On January 4, Leapmotor announced the start of the New Year's courtesy season, with a maximum of 17,000 yuan of tail payment vouchers for each car, and a deposit of 5,000 yuan is required for C01 range extension, C11 range extension, C11, C01, and T03 models to participate in the event. On January 5, Leapmotor launched a campaign to issue 350,000 yuan of New Year's service vouchers, including 30 yuan, 50 yuan, and 100 yuan service New Year consumption vouchers, a total of 8,000 pieces.
On January 8, the AVATR 11 Hongmeng version of the smart enjoy upgrade was officially launched, with four versions launched, with a price range of 300,000-390,000 yuan. At the same time, it has launched a limited-time two-choice car purchase right: a high-end intelligent driving package worth 26,000 yuan for a limited time, and a deposit of 5,000 yuan to deduct 25,000 yuan for the car, which is equivalent to a direct discount of 20,000 yuan.
Recently, Li Bin, chairman and CEO of NIO, released the first internal letter of 2024, saying that he must make every effort to face a more complex competitive landscape. "We will face stronger competitors and more excellent products, face more fierce price wars and more complex public opinion atmosphere, every colleague must have enough mental preparation, give up illusions, face the challenge. ”
There are not a few car company leaders who have the same mentality as Li Bin, and they do not want to withdraw from the "price war", but want to "go to the next level" this year, and then directly involve competing products.
Ping An Securities Research Report predicts that the "price war" dominated by leading new energy vehicle companies will continue in 2024, especially in the mainstream price band of 100,000~200,000 yuan. In addition, the decline in battery costs also provides room for car companies to cut prices for new energy vehicles.
The knock-on impact of Tesla's price cut at the beginning of last year on China's auto market has brought a strong psychological expectation to consumers - Tesla's price cut, China's new energy car companies will also follow.
This time, at least from the perspective of consumers' psychological expectations, Tesla's price reduction behavior seems to be following the rhythm of China's new energy car companies.
The "control" fails
Through the brand influence accumulated in the early stage and the ability to control the supply chain, Tesla was able to achieve its own "profit maximization" through price adjustment.
In this regard, some users left a message saying: Users who first rise and force orders to wait and see, turn around and drop again, and pull up a wave of sales, Tesla will win twice.
During Tesla's earnings call, analysts asked how Tesla adjusts its prices, but Musk did not respond positively, only mentioning that they will collect sales data in various regions every week and adjust prices in a timely manner.
However, Tesla's order volume and delivery cycle will be an important reference.
In addition, the penetration rate of the local new energy market, or the market's acceptance of new energy vehicles, and the market environment it faced at that time may be the basis for Tesla's price reduction decision.
This is also an important reason why Tesla has always insisted on gradually lowering and not directly killing all new energy vehicle companies. If the market capacity is limited, even if Tesla directly reduces the "floor price", it may not be able to obtain the expected sales, but the strategy of gradually reducing according to the market capacity and growth rate can better ensure the maximization of its own interests.
Taking the price reduction wave at the beginning of last year as an example, although a number of new energy brands followed Tesla's pace of price reduction, only Tesla became the only new energy vehicle brand to achieve growth in January last year, and other new energy brands that passively followed did not get much benefit.
However, the gradual price reduction will also allow competing products to adapt to the rhythm of the "price war", which requires Tesla itself to continue to evolve to maintain its brand value and technological superiority.
Judging from the current situation, Tesla is betting on the empowerment of AI and related autonomous driving technologies at the moment when competing products are beginning to catch up, trying to establish a leading edge with a generation difference between the existing and existing new energy vehicles. Although Musk has repeatedly emphasized the profit margins of AI and related autonomous driving technologies in the future, it is almost a sure thing that it will be difficult to land in the short term.
Therefore, Tesla's biggest competitor in "control" is not BYD, "Wei Xiaoli" and other new energy car companies, but the expectations of the capital market.
Tesla continues to launch a large-scale "price war" in the short term, so the "decline" of relevant financial data seems inevitable, unless the company's car sales reach a new order of magnitude to form a greater scale effect.
Although from the performance of Tesla's current net profit and gross profit margin, as well as the continuous decline in lithium carbonate prices further upstream, Tesla does have room to continue to decline. However, for a number of investment and analysis institutions, it is difficult to predict where the next new energy vehicle sales will be, and in the face of declining financial data, it can only be treated with a "panic" attitude. In the past two weeks, Tesla's market value has evaporated by more than $94 billion.
In other words, while Musk is peddling his technological dreams, he also needs to more systematically convey his understanding of cost control and scale effect to the market.
Resources:
Dolphin Investment Research "Tesla: Painting Cakes in a Big Year, Landing in a Small Year, It's Too Difficult to Accompany You for a Long Time"
Wall Street News "The Evil Consequences of Price Cuts: Tesla's Profit Plummeted by 20% in the First Quarter, Gross Profit Margin Fell Less Than Expected, and Fell More Than 4% After Hours"
Luzhong Morning News "Tesla fired the "first shot" of price cuts, car companies seek a breakthrough in the price war"
Golden Horn Finance "Tesla who was kicked off the throne, how to fight back?"