Tesla, which started the "first shot" of this year's price war in the automotive industry at the beginning of the year, continued to lower prices in the last two months of this year.
On November 25th, Tesla launched a final payment discount campaign. From November 25th to December 31st, Tesla Model Y rear wheel drive and long-range all wheel drive models will have a final payment discount of 10000 yuan, starting at 239900 yuan, and can also choose a 5-year zero interest financial plan.
Tesla stated that with the latest policy of "reducing the final payment by 10000 yuan for limited time delivery", combined with a 5-year zero interest financial plan and national and local "trade in" subsidies for new energy, buying an electric vehicle can directly save at least 50000 yuan.
Tesla's "sales champion" price reduction hits annual sales
At the beginning of 2024, Tesla predicted in its financial report that the growth rate of Tesla vehicle sales would slow down, significantly lower than in 2023. In the first three quarters of this year, Tesla delivered 1.293 million electric vehicles worldwide. To achieve the delivery target of 1.81 million vehicles by 2023, Tesla needs to deliver over 500000 vehicles in the fourth quarter.
Tesla's price reduction for the Model Y model this time may be due to the consideration of rushing sales in the fourth quarter, as the Model Y model is Tesla's "sales champion". Previously, in 2023, the total sales of Tesla Model Y in the Chinese market reached 647000 units, winning the annual model sales championship. In October 2024, according to third-party platform statistics, Tesla Model Y won the first tier and new first tier city vehicle sales rankings.
Tesla has stated that China is one of the lowest priced markets for Tesla globally, with a maximum discount of 185000 yuan compared to other regions. Taking Model Y as an example, the starting price in the UK is over 400000 RMB, while in China it is only 239900 RMB.
According to incomplete statistics from reporters, Tesla has conducted at least 6 price reductions or promotional activities in the Chinese market since the beginning of this year. On January 12th, Tesla China's official website adjusted the prices of the Model 3/Y rear wheel drive version and long-range version by a range of 6500 to 15500 yuan. On February 1st, Tesla offered a limited time discount of 8000 yuan in cash for the designated version of Model Y. On March 1st, Tesla offered a limited time car purchase benefit of up to 34600 yuan. On April 21st, Tesla reduced the price of its Model Y, Model S, and Model X models for sale in the Chinese market by 14000 yuan. On July 1st, Tesla launched multiple car purchase discounts such as "5-year zero interest" for Model 3 and Model Y.
Behind this is the decline in Tesla's costs. In its Q3 2024 financial report, Tesla stated that the cost of selling bicycles has dropped to a historic low of approximately $35100 (approximately RMB 254000). Tesla's Chief Financial Officer Vaibhav Taneja stated that this is due to the reduction in raw material costs, shipping fees, tariffs, and other one-time expenses, as well as the implementation of the company's cost reduction and efficiency improvement measures.
As of the close on November 22, Tesla's stock price was $352.56 per share, up 3.8% and setting a new high since the first half of 2022. The company's total market value reached $1.13 trillion. Although Tesla's sales will slow down in 2024, it is expected to return to the growth channel in 2025. According to Tesla CEO Musk's prediction, unless there is a major negative event, Tesla's car sales will increase by 20% to 30% by 2025.
Inventory in the automotive industry is decreasing, and the intensity of price wars is slowing down
Since the beginning of this year, price wars in the automotive industry have become a norm, coupled with policies such as trade in, leading to a strong destocking cycle in the passenger car market. According to the Passenger Car Market Information Joint Branch of the China Association of Automobile Dealers (CAAM), as of the end of October 2024, there were 2.97 million passenger car garages in China, a decrease of 50000 units from the previous month, a decrease of 710000 units from October 2023, and a decrease of 750000 units from October 2022.
Cui Dongshu, secretary-general of the Passenger Car Federation Branch, said on his personal official account that the number of days of future sales supported by the inventory at the end of October 2024 and the existing inventory based on the comprehensive estimation of future sales volume would be 40 days, which would decrease significantly compared with 64 days in October 2022 and 50 days in October 2023, and the overall inventory pressure of the passenger car industry would be small.
Since the beginning of this year, the intensity of the car price war has exceeded that of previous years. According to Cui Dongshu's statistics, in the first eight months of 2024, the overall number of discounted brand models in the domestic market was 173, exceeding the level of 150 models in 2023 and the total number of discounted brands before 2022.
However, Cui Dongshu believes that as the autumn price reduction trend gradually stabilizes, the passenger car market will gradually return to a normalized competitive situation of promotional increment. With the strengthening of promotional subsidies for national scrapping and renewal, the market has rebounded, and the driving effect on the car market is obvious. Therefore, the pressure of price wars has relatively eased, and the car market will enter a good state of sustained strength at the end of the year.
According to the macro research data from Dongfang Jincheng, with the continued support for the "two new" policies, China's automobile sales continued to improve in October, and the "price war" of automobiles further eased. The price of new energy cars decreased by 6.6% year-on-year, further narrowing the decline compared to the previous month. The price of fuel powered small cars decreased by 6.1%, the same as the previous month.
According to a research report by Xinda Securities, the automotive industry will start a large-scale price war in 2023, and the price war will continue in 2024. However, joint venture brands have accelerated their decline in products, channels, marketing, and other aspects, and their market share may further concentrate on leading independent and new forces. Looking ahead to 2024-2026, it is expected that the elimination competition in the automotive industry will accelerate, and car companies will engage in a decisive battle between scale, cost, and technology. The share of joint venture brands may decrease from below 40% to below 20%, and the 20% share released will correspond to the growth space of independent brands.
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