Tesla strategically lowers prices in China for the Tesla Model 3 and Tesla Model Y.
Tesla EVs now over 40% cheaper in China than the US
“Pierre Ferragu - NewStreet Research said: Between 4Q22 and 4Q23 Tesla can lower Average Selling Price(ASP) by 8% without a dent on margins. This grows the addressable market by 50% (Auto demand is very elastic) In a recession, demand tanks 10-15%, so Tesla will still be able to grow units 36%, out of an addressable market growing 50%!.”
Here is Pierre's excellent chart showing visually how Tesla can continue to grow units in China despite a reduction in the average selling price:
Prices went up significantly for Tesla EVs over the last 2 years because of supply chain problems due to COVID and because demand was increasing to much causing a backlog in orders, but now Tesla has decided it is time to reduce prices for the Tesla Model 3 and Tesla Model Y.
Here are the new Tesla China car prices
• Tesla Model 3 RWD: $33,023 (11.7% drop)
• Tesla Model 3 P: $48,014 (5.7% drop)
• Tesla Model Y SR: $37,826 (10% drop)
• Tesla Model Y LR: $45,103 (13.4% drop)
• Tesla Model Y P: $52,381 (9.5% drop)
Tesla can lower its EV prices without hurting margins for multiple reason: The ramp of Berlin and Austin improves average unit costs, subsidies in the US, end of shipping from China to Europe, improving supply and input costs. And a weakening USD compared to Chinese yuan would also help margins.
Tesla can still retain the high profit margins in China, now that supply-side is cheaper and logistical constraints have eased. Also the cost of commodities have come down stigmatically, so Tesla can now pass onto its customers more value with lower prices.
Tesla Giga Shanghai Cost Down 20%
Not only the cost of raw materials is down, the latest manufacturing upgrade for Tesla China in December also brought cost down significantly. It’s estimated the manufacturing cost is down 20% in Tesla Giga Shanghai. Tesla China VP Grace’s microblog post also confirms this.
If margins can withstand price cuts then Tesla cutting is actually bullish
since more sales & profit will be increasing.
Another positive is the announcement of Tesla Model X and Tesla Model S being introduced to the China market. This will certainly take away market share from BMW, Audi and Mercedes-Benz who control 70% of the luxury segment in China.
Tesla pricing for the Model S and Model X in China:
• Tesla Model S LR: $115,000 USD
• Tesla Model S Plaid: $147,000
• Tesla Model X LR: $128,000
• Tesla Model X Plaid: $151,000
Tesla has given Chinese customers a reason to go and buy one of its EV vehicles, Ross Gerber, cofounder of Gerber Kawasaki Wealth and Investment Management, said.
Komentarji