On November 9th, Tesla announced that the price of the Model 3/Y Long Range Edition will officially increase from now on!
In November, just as several domestic car companies announced a reduction in official selling prices, Tesla once again "reversed course". Why did Tesla choose to "go against the trend" to increase product prices? Will its price reduction stir up the "spring water" in the domestic automotive market?
Unusual Tesla's First "Pre announced" Price Increase
On the morning of November 9th, Tesla announced that from now on, the price of the Model 3/Y Long Range Edition will officially increase! The selling price of the Model Y All Wheel Drive Long Range Edition has been adjusted to 302400 yuan, up 2500 yuan from 299900 yuan previously. The price of the Model 3 Long Range Renewal has been adjusted to 297400 yuan, from 295900 yuan previously, with an increase of 1500 yuan.
Previously, the Tesla Model 3 was available in two configurations: standard range and long range, with prices of 259900 yuan and 295900 yuan respectively; The Model Y has three models for sale, namely the standard range, long range, and high-performance versions, with prices of 263900 yuan, 299900 yuan, and 363900 yuan, respectively. This means that the selling price of the Model Y Long Range Edition will once again exceed 300000 yuan.
It is reported that the Model Y is currently Tesla's best-selling model, with 41428 units sold in China in September this year, accounting for 95.22% of Tesla's sales in China.
In fact, there are early signs of this round of price increase.
On November 8th, multiple Tesla salespeople posted a forecast on their WeChat Moments that Model Y was about to increase in price, stating that "Model Y is about to increase in price, which is a continuing adjustment after a 14000 yuan increase in high-performance prices
Previously, there were rumors that Tesla would raise the prices of its products again in the near future. Subsequently, Tesla confirmed the price increase in an abnormal manner.
According to Securities Daily, on November 8th, the person in charge of Tesla stated: "Tesla's pricing system has always been transparent, and we do plan to adjust the prices of the Model Y related versions accordingly." The above-mentioned person also revealed that the prices of the new version of the Model 3's long range version will also be raised.
Tesla China has adjusted prices multiple times this year, but each adjustment was announced and executed directly on its official website. This time, it is considered the first time that a forecast has been made for the Model Y price increase.
Why did Tesla "operate against the trend" after rolling up prices?
It is understood that the new Tesla Model 3 will start pre-sale on September 1st and domestic delivery on October 26th; The new Model Y will be delivered during the National Day holiday, when Tesla's slogan was "improved performance and configuration, unchanged price".
It is worth noting that before this, Tesla had just completed the price increase for the Model Y high-performance version. On October 27th, Tesla's official Weibo account announced that the price of the domestically produced Model Y high-performance version was increased by 14000 yuan, with an adjusted price of 363900 yuan. At that time, Tesla once told reporters that only the domestic Model Y high-performance version had a price increase, while the prices of the rear wheel drive standard version and the long range version of the Model Y remained unchanged.
In the view of Cui Dongshu, Secretary General of the National Passenger Car Market Information Joint Conference, Tesla's move to increase the prices of Model Y and Model 3 is a price adjustment plan made due to increased profit pressure.
At the beginning of this year, Tesla significantly reduced prices in multiple countries and regions such as China, Japan, South Korea, the United States, and Europe, involving best-selling models such as the Model 3 and Model Y, which also became the main reason for the high sales growth in the first two quarters of this year.
At that time, Tesla CEO Elon Musk expressed his willingness to lower the prices of electric vehicles during turbulent times. Although this would affect the company's gross profit margin, he was willing to sacrifice it for sales growth. "Tesla needs to continue to lower prices to reduce monthly repayment pressure on users, so that more people can afford it
Tesla's pricing strategy is based on cost pricing, and if there is a fluctuation in the price of raw materials, it may not only affect one car. "Gao Yunpeng, director of the China New Energy Vehicle Industry Innovation Alliance, believes that Model Y has just completed the evolution and upgrading of the entire series of models, such as adding ambient lights, using technology fabric materials for the dashboard and front door trim, and updating 19 inch twin star wheels, These configurations will increase the cost of the entire vehicle.
Industry insiders have also stated that one of the reasons for Tesla's price increase is due to a shortage of supply.
According to official data from Tesla, the actual annual production capacity of Shanghai's super factory has expanded from 750000 vehicles/year in the second quarter to over 950000 vehicles/year in the third quarter. According to the latest production capacity standards, the Shanghai Super Factory can take off one car every thirty seconds. However, with the release of the new versions of Model 3 and Model Y, even though the Shanghai super factory is operating at full capacity, the market still faces a shortage of supply.
According to data released by the China Federation of Automobile Manufacturers on November 8th, Tesla China's wholesale sales in October were 72115 vehicles, second only to BYD (300000 vehicles). Tesla's weekly sales from October 30th to November 5th exceeded 14000 units, a year-on-year increase of 39%.
According to information on Tesla's official website, the expected delivery times for the updated Model 3 and Model Y are both 2 to 6 weeks.
In addition, Tesla's global price cuts since the beginning of this year have greatly affected its profitability. Tesla's third quarter financial report shows that its total revenue in the third quarter was approximately 23.4 billion US dollars (approximately 171.2 billion yuan), a year-on-year increase of 9%, lower than Wall Street's expectations and the slowest year-on-year growth rate in three years; The net profit was 1.853 billion US dollars (approximately 13.9 billion RMB), a year-on-year decrease of 44%, and there was also a significant decline compared to the first two quarters of this year. Affected by the continuous price reduction, Tesla's gross profit margin further declined in the third quarter of this year, reaching a four-year low of 17.9%. Compared to the gross profit margin of 18.2% in the second quarter of this year, it decreased by 0.3 percentage points, and compared to the gross profit margin of 25.6% in 2022, it decreased by 7.7 percentage points.
Tesla plans to alleviate the decline in gross profit margin by raising the prices of two domestically produced cars, but this will put some pressure on it to achieve its annual sales target of 1.8 million vehicles, "Cui Dongshu believes.
Will other car companies follow up during the year-end momentum stage?
In October, domestic car sales reached a new high, with new energy vehicles achieving particularly impressive results. Data shows that in October, the production and sales of new energy vehicles completed 879000 and 904000 units respectively, a year-on-year increase of 16.1% and 27.7%. However, after October, the traditional off-season combined with year-end promotional pressure has reignited the "price war" in the car market.
According to incomplete statistics by Securities Daily reporters, as of November 6th, four car companies have announced price reductions and promotions this month. Since October, there have been more than 10 car companies offering price reductions and promotions, including many popular models such as BYD, Zhiji, Geely Krypton, and Zero Run, with discounts reaching up to 51000 yuan.
The reporter conducted a practical investigation on brands such as AITO Wenjie and Ideal Automobile in Beijing and learned that compared to the official price reductions announced by the aforementioned car companies, some brands have also engaged in terminal price "hidden price reductions". For example, Wenjie M7 has launched a 30000 yuan discount rights activity, as well as a subsidy for overdue car pickup, with a daily amount of 200 yuan and a maximum of 10000 yuan; Ideal Automobile is also launching promotional activities at the terminal, with the highest discounts for Ideal L7 and L8 currently reaching 36000 yuan, among others.
At present, the industry has entered the year-end momentum stage. Due to the rapid iteration of vehicle models and fierce 'price wars' this year, the inventory situation of dealers is not optimistic. "Zhang Xiuyang, Secretary General of the China Passenger Car Industry Alliance, said that competition and promotion between car companies will provide stable support for the year-end car market and help the car market hit a new high in sales. On the other hand, as the competitive pressure intensifies in the impulse stage, more car companies will join the promotion and price reduction ranks in the future, further squeezing the profit space of car companies.
After a price war, Tesla has intensified competition in the domestic electric vehicle market, and most manufacturers are trying to maintain and expand market share through price reduction promotions. However, in this context, Tesla has "rebounded" and announced that the price of the car model has increased. Will this stir up a "spring water" and usher in a "price surge" in the domestic car market?
As of the close on November 8th local time, Tesla was trading at $222.11, a decrease of 0.03%, with a market value of $706.07 billion.