After officially announcing price increases in the North American and European markets, Tesla is also about to adjust its prices in China. And this time Tesla did not cut the price, on the contrary, there is news that Tesla began to raise the price of Model Y models by 5,000 yuan from April.
Tesla's price adjustment is not only the increase of Model Y models, but also the cancellation of the official car insurance subsidy of 8,000 yuan and the car paint reduction policy of 10,000 yuan. Based on these factors, the comprehensive price increase of the Model Y will reach 23,000 yuan.
Why did Tesla raise prices against the market?
Tesla's price increase is more from the perspective of improving financial data.
On January 25 this year, Tesla released its financial report. Its revenue last year reached 96.773 billion US dollars, a year-on-year increase of 18.79%. Net profit attributable to common shareholders was $14.997 billion, up 19% year-on-year. Non-GAAP net income attributable to common shareholders was $10,882 million, down 23% year-on-year. This is the first time since 2017 that Tesla's annual net profit has declined.
The main reasons for the decline in Tesla's net profit are the larger-than-expected decline in car prices, the intensification of competition in the electric vehicle market, FSD and third-generation product development, etc. In the short term, Tesla will also invest a lot of money in the research and development of new models and the construction of new factories, so the short-term price increase can improve the gross profit margin of the product, reversing its gross profit margin falling below 20% in the fourth quarter of last year, which is lower than that of Ideal and BYD.
However, to a certain extent, it is not surprising that Tesla, which focuses on electric vehicles, has a lower gross profit margin than car companies that have a large number of hybrid vehicles.
Among the global electric vehicle companies, Tesla is of index significance. As a mainstream electric vehicle company in China, Tesla certainly knows that the domestic new energy vehicle industry is experiencing a price war. In this case, Tesla's reverse price increase, the movement behind it is worth considering.
On the one hand, among the new domestic car companies, except for Li Auto, they are all losing money. Continued bleeding means that automakers have to raise money from the securities market, place additional offerings to interested investors, or issue bonds to borrow money, which is not a long-term solution. Recently, there are new domestic car companies, including Gaohe, Aiways, and Weimar, which have actually encountered financial problems.
In the absence of stable access to financing, they all fell into crisis one by one. As for other new forces, although there are still a lot of cash reserves in the short-term account, if they are consumed with an annual loss of up to 10 billion, once the terminal sales are cold, then the capital chain is likely to be challenged.
On the other hand, traditional car manufacturing is important to Tesla, but it is not a priority development direction. On the contrary, core technologies such as artificial intelligence are the most solid support for Tesla's market capitalization that is now far ahead. In other words, if Tesla can make progress in areas such as artificial intelligence and humanoid robots, especially in AI-based self-driving technology, then Tesla's sales and stock price will rebound rapidly.
To a certain extent, the more funds that Tesla can raise after the price increase will also be better used to support the research and development of new technologies.
Where do Chinese EV companies go from here?
Some people say that Tesla raised prices after April 1, leaving a certain market space for Xiaomi SU7.
After the news of Tesla's price increase was confirmed, Lei Jun, who was about to release the price of Xiaomi SU7, said on social platforms, "Tesla is too good, I really admire: the current electric vehicle market, the competition is so fierce, only Tesla dares to raise prices." "In the case of sharp price cuts in China, including BYD, Geely, Changan, etc., Tesla still has the confidence to announce price increases at the expense of potential orders, which is not possessed by many domestic car companies.
If Tesla's customers are not so sensitive to price, then Tesla after the price increase can quickly reverse the long-term decline in gross profit margin, and more importantly, with the turn of the decline in gross profit margin, it can bring about a reversal in the stock price, then Musk's purpose of this price adjustment has been achieved.
But if after Tesla's price increase, consumers' enthusiasm for buying cars has decreased, it may be more than worth the loss. Therefore, everything still depends on the attitude of domestic consumers towards Tesla's price adjustment.
However, from a broader perspective, there is a high probability that domestic car companies should not have the confidence to raise prices. Stabilizing terminal sales first through price reduction is the top priority of all companies. However, blindly fighting a price war will inevitably lead to unprofitable car companies in the end. This will make enterprises lack R&D resources for core technologies, and will slowly lose their core competitiveness.
But no matter how you look at it, Tesla is now one of the few profitable car companies in the world, so it also has enough confidence to cut prices. Continued profitability has given Tesla the cost of trial and error, and even if the decision is wrong, Tesla can readjust the price in a short time.