Musk's game-breaking strategy, pointing to the 35 million car market, is Tesla's transformation a must-win battle?

Tang Yinghu

2024-05-13 10:59Posted in Hainan Military Creators

As we all know, the new product that Musk has in mind is the $25,000 new model he threatened in 2020. This not only carries the future of Tesla, but may also lead the new direction of the global electric vehicle industry.

The success of the Model 2 will have a direct impact on Tesla's ability to smoothly transition to the next stage of development, that is, to transform from an innovation leader to a stable and profitable industry giant.

The reason why this car has not been able to come out for a long time is because the self-developed 4680 battery has not been able to achieve the goal of expanding production scale, improving process and reducing costs. And electric vehicles equipped with Chinese brand batteries cannot receive the $7,500 subsidy from the US government, and are not competitive.

Now Musk has announced that the long-awaited Model 2 will be launched by the end of 2025. But in the fiercely competitive Chinese market, with a starting price of 180,000 yuan, it's hard to believe that the Model 2 will have much prospect in the small car market.

Its main markets are still Europe and the United States, and the total car market on both sides is 35 million, which is still greater than the 25 million in China's domestic market. The $25,000 Model 2 is seen as Tesla's sword to break through the bottleneck of market size, especially in Europe, which is dominated by small cars.

In the U.S. electric vehicle market, Tesla dominates: its market share will reach 55% in 2023, but the number will only be just over 650,000 units. The next wave of growth will be led by the Model 2, but the Model 2 will not be launched until the second half of 2025.

Tesla's problem is the same as that of GM and Ford, and it cannot overcome the obstacles of inefficient production and excessive wages for workers in the United States. The cost of production, structure, capacity, and supply chain issues in the U.S. will all be chasms that Tesla must overcome.

At this crossroads, Tesla will not only have to deal with the headwinds of a slowing global market, but also face fierce competition from China, the world's largest electric vehicle market.

Every move Musk makes, whether it is product innovation or strategic adjustment, is injecting new vitality into Tesla, trying to break the current deadlock by targeting the 35 million car market. It's just a little late.

If the Model 2 is launched, it should be able to achieve large-scale sales in the European and American markets, and achieve some success. Tesla's price-to-earnings ratio has fallen from 300 times at its peak to 50 times today, which is still a valuation far beyond the average car company.

Tesla's market capitalization reached $1.2 trillion in 2021, four times that of Toyota. The valuation assumes that annual sales can rush to 20 million units, which is twice that of Toyota, and the profit is also twice that of Toyota.

Now that idea is completely shattered, because neither China nor other rivals can let Tesla dominate the market so much, and the price war has a big impact on profits.

Of course, Tesla will not go bankrupt, but the stock price positioning will return to a normal head manufacturing company, from a trillion valuation to a reality test, this should be Tesla's destination.

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