Tesla suffered "Waterloo", and then "asked for help" from China

Car K-line

2024-05-13 07:53Posted in Beijing Automotive Creators

Introduction: Sales and performance have declined, and stock prices have plummeted, in addition to layoffs and price cuts, Tesla can think of a way to turn to China for help.

Tesla is laying off employees again!

Following another layoff notice on May 5, the world's most valuable electric vehicle maker has been laying off employees for four weeks, and the "hand of layoffs" is directed at the Shanghai Gigafactory.

According to people familiar with the matter, this round of layoffs involves the factory's customer service, engineers, production line workers and logistics team. At present, most of the dismissed employees have left the factory after receiving compensation.

For a long time, "Iron Man" has been driving Tesla, just like riding on a SpaceX rocket to "overtake all the way", but in the first quarter of 2024, Tesla is in trouble, and Musk has come from afar again to ask for help from China after a series of actions such as layoffs and price cuts......

On April 29, Tesla CEO Elon Musk ended his "lightning" trip to China and happily returned to the United States on his Gulfstream G550.

On the same day, Tesla's stock price soared 15.31%, the highest one-day increase since 2021, and its market value soared by nearly 600 billion yuan!

1) Efficient visits to China

The reason for Musk's trip is that the fully self-driving (FSD) system that he has highly advocated is expected to be introduced in China.

For this trip to China, Musk even postponed his plan to visit India on the grounds of busy business, which also made Tesla's construction of a factory in India suddenly uncertain.

[Image source: China Association of Automobile Manufacturers]

And when Musk flew to Beijing on the same day, he received a "big gift". In the "Notice on the Testing of Four Safety Requirements for Automotive Data Processing" announced by the China Association of Automobile Manufacturers on the 28th, Tesla became the only foreign brand on the list.

This means that the domestic ban on Tesla may be lifted one after another.

After being received by the top management, Musk seems to have got the answer he needs.

It is reported that Musk proposed plans to land "driverless taxis" in China. Although China has not yet fully approved the full implementation of Tesla's FSD in China, it may allow it to test and demonstrate in China first.

2) Flash crash of sales & sharp drop in stock price

Before Musk's visit to China, Tesla had just experienced a nearly "catastrophic" quarter.

Global sales "flash crash" and stock price plummeted, Tesla 2024 will not go well.

"Image source: Tesla 2024 Q1 Report"

On April 2, Tesla announced delivery data showing that in the first quarter of 2024, Tesla delivered 386,800 vehicles worldwide, a year-on-year decrease of 9% and a month-on-month decrease of more than 20%.

This is the first time in nearly four years that Tesla's deliveries have declined year-on-year, and the last time was caused by the shutdown in the second quarter of 2020 due to the impact of the new crown epidemic.

In the same period, Tesla's stock price opened high and went low from $250.08 per share on the first trading day of the new year (January 2) to close at $175.79 per share on the last trading day of March (March 28), a cumulative decline of 29.25% in the quarter, and the market value evaporated by more than $230 billion.

Even into April, Tesla's stock price remained depressed, hitting a nearly 15-month low of $138.8 per share on April 22. Only 9 months have passed since the high of $299.29 per share on July 19, 2023, and the stock price has been "cut in half"!

This is obviously not good news for the darling of the capital market.

3) Declining profits vs. "layoffs"

The "flash crash" of sales directly led to a decline in Tesla's performance in the first quarter.

According to the financial report for the first quarter of 2024, Tesla's quarterly revenue was $21.301 billion, a year-on-year decrease of 8.69%; net profit was 1.144 billion US dollars, down 54.94% year-on-year; The gross profit margin was 17.35%, a decrease of nearly 2 percentage points from the first quarter of 2023.

"Image source: Tesla 2024 Q1 Report"

In order to stop the continued decline in sales and reduce operating pressure, Musk made another proposal to reduce costs and increase efficiency, and made what he called a "difficult decision" - laying off employees by more than 10%. Tesla has about 140,000 employees worldwide, which means that more than 14,000 people will be laid off.

Tesla's fifth and largest "Guangjin Plan" (Guangjin Layoff) in 7 years has put employees in danger, and many people have begun to find another way out while waiting for the torment of being laid off.

Before layoffs are terminated, employee motivation may fall to the bottom, which in turn will affect the operational efficiency of the entire enterprise.

Although the layoffs have released some cost pressure on Tesla, it is still doubtful whether "efficiency increase" can be as expected in difficult times.

4) Slowing demand vs global price cuts

According to the data, European electric vehicle sales fell 11% year-on-year in March, of which the Italian and German markets fell by 34% and 29% respectively.

According to the New York Times, in the first quarter of this year, the sales of electric vehicles in the United States were about 269,000, an increase of only 2.6% year-on-year, but a month-on-month decline of 7.3%.

In the context of the slowdown in the global electric vehicle market demand, China, as the world's largest electric vehicle market, is naturally valued by Tesla.

"Image source: Passenger Association"

According to the data of the National Passenger Car Market Information Association (hereinafter referred to as the "Passenger Car Association"), in the first quarter of this year, the year-on-year growth rate of cumulative wholesale sales of electric vehicles slowed down by 2.2 percentage points compared with the same period in 2023, but still reached 10.1%.

However, Tesla's wholesale sales in China fell by 3.7% year-on-year to 221,000 units in the same period. Moreover, compared with the double-digit year-on-year growth of Chinese independent brands such as Geely, Cialis, Great Wall, and Chery, Tesla's year-on-year decline in China is even more dazzling.

In April, according to the statistics of the Passenger Car Association, Tesla's wholesale sales in China were 62,000 units, down 18% year-on-year and 30.2% month-on-month from March (89,000 units).

As Tesla's largest single market in the world outside the United States, Tesla's sales in China did not increase but fell in the first quarter, and there is still no improvement in the second quarter.

"Image source: Passenger Association"

Tesla, which is "on pins and needles", began to reduce its prices worldwide on April 20.

Taking the Chinese market as an example, Tesla cut the price of 14,000 yuan for the whole series, trying to "exchange price for volume". But in fact, as an industry leader, Tesla's price cut has ignited a new round of "price war" in the Chinese auto market.

In the face of the "battle" of independent new energy brands, it remains to be seen how much the price reduction can help Tesla's sales. But the price cut could lead to a decline in profitability, which could have a more far-reaching impact on Tesla's finances.

In the first quarter of this year, Tesla's net profit per car was about 2,958 US dollars (about 21,370 yuan), which was only 49.27% of the 6,004 US dollars (about 43,376 yuan) in the same period last year.

If this round of price cuts fails to boost sales, won't the gains outweigh the losses?

5）FSD+Model 2

Against the backdrop of having a "good story" and occupying a "good track", all problems are covered by the rapid improvement of performance. But as the growth momentum falls short or even the performance regresses, a series of contradictions will ensue, just like Tesla is currently experiencing.

The shrewd Musk obviously knows that the pursuit of short-term results such as price cuts and layoffs will not allow Tesla to completely get out of the quagmire.

The application prospect of FSD has always been pinned on by Musk, and it is also the key to Tesla's high valuation. Therefore, promoting its landing in China has naturally become an important means for Musk to seek long-term results.

In the U.S., even if the price of the FSD package is reduced by a third, it is still as high as $8,000. If the feature is implemented in China, the price will reach RMB 64,000.

There are currently more than 1.7 million Tesla users in China, regardless of the stock or expected increase, if FSD can land in China, it will undoubtedly be a "booster" for Tesla's profits in China.

[Image source: Tesla's official website"

It is worth noting that on this trip to Beijing, Musk was accompanied by Zhu Xiaotong, Tesla's global vice president, the former head of China, who is good at reversing the situation, or will be transferred back to China at Tesla's "moment of crisis" to promote the smooth entry of FSD into China.

It is also reported that Tesla has reached an agreement with Baidu, and the former will have access to Baidu's mapping license, while also obtaining Baidu's lane-level navigation system. This means that the last obstacle for Tesla's FSD to enter China has been cleared.

In addition, after Musk's visit to China, the construction of Tesla's "second factory" in Shanghai also has eyebrows. Tesla China has defined this as "expansion of production". It is likely to be used in the future to produce Model 2 models with a price range of about 150,000~200,000 yuan.

Views of AutosKline：

Quarterly deliveries fell year-on-year for the first time in four years, and quarterly revenue fell the most since 2013 (although only three quarters of revenue declined).

However, this time, even if Musk's "bet" FSD enters China as he wishes, it will be "chased and intercepted" by Huawei, Xiaomi, Xiaopeng and other Chinese brands of the same type.

After taking into account various factors such as price and degree of localization, what are the advantages of Tesla's FSD in the fields of algorithms and large models?

In an era when intelligent driving may become the core competitiveness of car companies, the competition between car companies in the Chinese market may really evolve into a direct dialogue between the two Chinese and American technology giants.

View original image 29K

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

•