Source: Kale Pictures Jia Qiong/photo
Less than a month before the price increase on April 1, Tesla China has cut prices, and it is a price reduction for the whole series.
On April 21, Tesla's official website in China showed that the price of all models was reduced by 14,000 yuan. Among them, the price of the rear-wheel drive version of the Model 3 was reduced to 231,900 yuan. The day before, Tesla took the lead in announcing a price cut for some of its models in the U.S. market. Compared with the previous dynamic price adjustment strategy based on cost accounting, Tesla is a little helpless to reduce prices in the two major markets in China and the United States.
In the first quarter of this year, Tesla's stock price continued to fall while deliveries fell short of expectations. In the face of the upcoming first-quarter earnings report, Tesla has launched a global layoff involving 14,000 employees before this round of price cuts, and Tesla CEO Elon Musk urgently needs to calm shareholders' emotions by reducing costs, increasing efficiency and stimulating sales.
It is worth noting that this price cut is only 20 days after the last Tesla price increase. On April 1 this year, Tesla only raised the price of all its Model Y products in the Chinese market. At that time, the price of the Model Y was raised to 263,900 yuan, the price of the Model Y long-range version was raised to 304,900 yuan, and the price of the Model Y high-performance version was raised to 368,900 yuan, all of which increased by 5,000 yuan.
Price reductions in multiple markets around the world
According to Tesla's official website in China, the price of the Model "S3XY" combination sold by Tesla in China has been reduced by 14,000 yuan. Among them, the price of the rear-wheel drive version of the Tesla Model Y has been reduced to 249,900 yuan, the price of the long-range version has been reduced to 290,900 yuan, the price of the high-performance version has been reduced to 354,900 yuan, the price of the Model 3 rear-wheel drive version has been reduced to 231,900 yuan, and the price of the long-range version has been reduced to 271,900 yuan The price of the S dual-motor all-wheel drive version has been reduced to 684,900 yuan, the Plaid version has been reduced to 814,900 yuan, the Model X dual-motor all-wheel drive version has been reduced to 724,900 yuan, and the Plaid version has been reduced to 824,900 yuan.
In addition to the price reduction, the Model Y and Model 3 have been adjusted in terms of preferential policies for interest-free loans.
At the beginning of April this year, Tesla China announced that it would launch a limited-time low-interest replacement policy for Model 3/Y models and launch a "zero interest" installment car purchase policy for the first time. In this regard, a staff member of a Tesla store said that after the price was reduced, the "zero interest" purchase of the Model 3 was also canceled.
"The interest-free loan for the Model 3 has not been retained after this price adjustment, and the new price and interest-free loan can only be selected, while the Model Y has multiple advantages such as interest-free loans, new prices, and the current car under the stars. A sales consultant at a Tesla store in Shanghai's Minhang District said that the multiple benefits of the Model Y also have a quantitative limit, and the loan interest rate of the Model Y will be restored when the starry sky is gone.
In fact, Tesla's price cut involves multiple regional markets around the world.
The Chinese market is not the first market for Tesla to reduce the price of its products, and on April 20, Tesla has adjusted the prices of its Model series models in the U.S. market, except for the Model 3. Among them, the Model Y rear-wheel drive version will be priced to $42,990, the long-range version will be reduced to $47,990, the high-performance version will be reduced to $51,490, the Model S dual-motor all-wheel drive version will be reduced to $72,990, the Plaid version will be reduced to $87,990, the Model X dual-motor all-wheel drive version will be reduced to $77,990, and the Plaid version will be reduced to $92,990.
In addition to reducing the price of its products, Tesla has also adjusted the prices of features such as autonomous driving in the U.S. and Canadian markets. On April 21, the price of the FSD package was reduced from $12,000 to $8,000 in the U.S. market, and the price of the package in the Canadian market was reduced from $16,000 to $11,000.
As early as the end of October to the end of November 2023, Tesla began to increase prices continuously. At that time, Tesla raised the prices of many products of the domestically produced Model 3 and Model Y four times in different ranges. Coupled with the price increase of the Model Y on April 1 this year, Tesla has raised the price in the Chinese market five times in half a year.
Tesla's large-scale price cuts may be related to its delivery in the first quarter that fell short of expectations. According to Tesla's official data, in the first quarter of 2024, Tesla produced a total of more than 433,000 vehicles, but only 386,800 were delivered worldwide, down 8.53% from the same period last year and 20.1% from the previous quarter. This is the first time in five quarters that Tesla has seen a quarterly sales decline.
Judging from the data, Tesla has shown "fatigue" behind the price adjustment. Auto analyst Zhong Shi believes that the current competitive environment of the new energy vehicle market is very different from when Tesla first made China. Domestic models are updated and iterated rapidly, constantly grabbing the cake of the new energy market, and the premise of car companies wanting more profits is to continue to maintain market share growth, Tesla wants to continue to boost sales, and price reduction is still the most direct means.
Musk needs an explanation
In the face of unprecedented pressure, Tesla's price reduction promotion is also reducing costs through internal "moving the knife".
In mid-April, Musk issued an internal email to all employees announcing that he would "lay off 10% of the global workforce". Among them, Tesla's layoffs in China involve multiple departments. Musk said in an internal email that Tesla is growing rapidly, and there is overlap in roles and job functions in some areas. As you prepare for Tesla's next phase of growth, it's important to look at all aspects of the company while reducing costs and increasing productivity. As part of this, Tesla conducted a thorough review of the organization and made the difficult decision to lay off 10% of its workforce globally, which will allow Tesla to lean and prepare for the next growth phase cycle.
From layoffs to price cuts, the capital market has put a lot of pressure on Tesla. Recently, analysts at about 15 institutions lowered their 12-month price targets for Tesla. As of April 19, Tesla was quoted at $147.05 per share, with a total market capitalization of $468.3 billion. According to statistics, Tesla's market value has evaporated by more than $300 billion compared with the end of 2023. Yan Jinghui, a member of the expert committee of the China Automobile Dealers Association, said that the capital market pays more attention to the development prospects of enterprises on the one hand, and their market performance on the other hand. At present, Tesla's new models have not yet landed, but the slowdown in market demand is intuitive.
It is worth mentioning that Tesla is expected to release its first-quarter earnings report after market hours on April 23 this year (Eastern time). The way Tesla cut prices and laid off employees before the release of the earnings report seemed to the outside world that Musk was making a final effort to explain how to give shareholders an explanation through various means. In addition, in order to enhance Tesla's competitiveness and topicality, Musk said that Tesla will release Robotaxi on August 8 this year, and at the same time, it is planning to integrate the social platform "X" into Tesla models.
In addition, on April 21, Musk said that he would cancel his upcoming trip to India due to Tesla's busy schedule. According to the original plan, from April 22 to 28 this year, Musk will visit India and announce Tesla's plans to build a factory in India during his meeting with Indian Prime Minister Modi.
The price war for new energy vehicles is heating up
Behind Tesla's announcement of price cuts in China, there is also a fierce price war in the auto market.
In mid to late February this year, BYD fired the "first shot", independent, joint venture car brands and "new forces" have entered the game; into March, the models covered by car companies' price reduction promotions have also spread from new energy vehicles to fuel vehicles, and some models even have a "one price a day" phenomenon; in April, with the Xiaomi SU7 on the market, the models participating in the price war are generally mid-to-high-end, and the prices are mostly in the range of 200,000-300,000 yuan.
According to incomplete statistics from the media, since April, more than 10 new energy vehicle brands have announced price cuts, and some car companies have launched promotional activities such as replacement subsidies, zero interest, and zero down payment.
On April 1, Wenjie announced a limited-time discount of 10,000-20,000 yuan for the new M7. After the discount, the price of the new M7 is 229,800 yuan to 319,800 yuan. Subsequently, NIO, Xpeng, Chery and others have launched replacement subsidy activities. Among them, NIO launched a subsidy of 1 billion yuan for the replacement of oil vehicles. On April 20, Xpeng Motors announced that it would launch a time-limited car purchase subsidy campaign of 500 million yuan, covering a total of four models of Xpeng G9, G6, P7i, and 2024 Xpeng P5.
Some new models have lowered their guide prices. On April 18, Li Auto's first model with a price of less than 300,000 yuan, the Ideal L6, was launched, with a starting price of 249,800 yuan. According to Liu Jie, vice president of commercial of Li Auto, the starting price of the Ideal L6 was originally set at 259,800 yuan.
A few days ago, Xpeng Motors announced that its mid-size SUV Xpeng G6 new 580 km long range Plus version model was officially launched, with a guide price of 199,900 yuan and a limited-time preferential price of 179,900 yuan, which is 26,000 yuan lower than the price of the old entry-level version.
The fierce price war of new energy vehicles has become a distinctive feature of the auto market since 2024. Cui Dongshu, secretary general of the passenger association, said that in the first quarter of 2024, the number of price reduction models has exceeded 60% of the whole year of 2023, mainly the price reduction of new energy models such as pure electric and plug-in hybrid, and the price reduction of fuel vehicles is very small.
The large-scale price reduction of new energy vehicles will further squeeze the market share of fuel vehicles. According to the data of the Passenger Car Association, in the first half of April, the retail penetration rate of new energy passenger vehicles was 50.39%, surpassing that of traditional fuel passenger vehicles for the first time.
The price reduction reflects the maturity of the supply chain
Pan Helin, a well-known economist, pointed out that in the future, the price war of new energy vehicles is inevitable, because the current supply chain of new energy vehicles has become mature, and the cost of various car companies is getting closer and closer. In this case, in order to reduce the product backlog and increase the scale of sales, price reduction is an option for car companies. Pan and Lin believe that for car companies, there are two things that should be done in the future: on the one hand, to achieve self-sufficiency in key supply parts, and on the other hand, to expand the scale of sales, and to share the fixed costs with sales volume to reduce the average cost of each car.
Zhang Yi, CEO of iiMedia Consulting, also believes that the price cuts of various car companies reflect the gradual maturity of the market, and in the future, car companies can only win the competition by further improving the overall efficiency of the supply chain with the comprehensive cooperation of management, marketing, and cost.
(WeChat public account "Caizhi Headlines" is synthesized from: Beijing Business Daily, China Business Daily, China Securities Journal, China News Network, Guangzhou Daily, etc.)
Editor: Bai Jing
Proofreading: Fenghua
Review: Gong Zimo