After Tesla raised prices in the US and European markets one after another, Tesla China finally followed suit. On March 20th, it was reported that Tesla was about to increase its official price on April 1st, and the Model Y model's price was raised by 5000 RMB.
Tesla China insiders subsequently confirmed this news to reporters and stated that they will announce it immediately, which also means that Tesla's first domestic price increase in 2024 is about to be implemented. While domestic new energy vehicle companies are competing to "roll up" prices, Tesla unexpectedly raised prices against the trend in China, which surprised the market.
However, it should be mentioned that Tesla's stock price has been under continuous pressure recently. In the eyes of many institutions, Tesla's continuous price cuts in 2023 have damaged the company's profits in the face of intensified competition and slower delivery volumes. In the past year, Tesla's gross profit margin has significantly declined.
Multiple price reductions and promotions within the year
According to market news, Tesla is set to increase its official price on April 1st, with the Model Y model selling for an additional 5000 yuan. Meanwhile, the current official current car insurance subsidy policy of 8000 yuan and the maximum paint reduction policy of 10000 yuan will also expire on March 31st. The actual increase in price this time is as high as 23000 yuan.
The reporter verified this news with Tesla China personnel and received a positive response. The person told reporters, "It has not been announced yet, but it will be officially announced soon.".
In fact, the price increase of the Model Y model in China is part of Tesla's recent global price increase plan. On March 16th, Tesla's official website showed that the Tesla Model Y model had a price increase of $1000 in the US market. This price adjustment will take effect on April 1st, involving all Model Y models.
Subsequently, Tesla announced that starting from March 22nd, the price of Model Y vehicles in some European countries will increase by approximately 2000 euros. Although the reasons for the price adjustment have not been announced yet, analysts believe that this price increase may be related to rising raw material costs and global supply chain tensions.
However, from the perspective of the Chinese market, the upcoming official price increase will also be Tesla's first domestic price hike in 2024. Tesla has publicly launched three price reductions and promotions in the past three months of this year.
On the first day of 2024, Tesla launched a car purchase promotion in China, announcing a current insurance subsidy of 6000 yuan for the Model 3 rear wheel drive, as well as a low interest financial policy, offering a maximum discount of 23000 yuan for limited time purchases of Model 3 and Model 1 Y; On January 12th, Tesla China officially announced that the price of the updated Model 3 had dropped to 245900 yuan, a decrease of 14000 yuan; The selling price of Model Y has dropped to 258900 yuan, a decrease of 7500 yuan.
On March 1st, Tesla China announced a limited time car purchase promotion. The activity stipulates that buyers of Model 3 and Model Y cars can enjoy a maximum discount of 34600 yuan in insurance subsidies, car paint benefits, and low interest finance before the end of March.
However, Tesla's profit margins so far this year seem to have not significantly boosted sales. According to data from the China Association of Automobile Manufacturers, Tesla's wholesale sales in February were approximately 60400 vehicles, lower than 74400 vehicles in February last year, a year-on-year decrease of 18.87%, and also lower than 71400 vehicles in January, a month on month decrease of 15.51%.
Significant decline in profitability
Over the past year, Tesla has been trying to sacrifice profits to maintain market share. Last year, Tesla launched price reduction promotions in multiple countries and regions.
In the Chinese market, the average transaction price of Tesla Model 3 has decreased by 34000 yuan to 262000 yuan compared to 2022; The average transaction price of Model Y has decreased by nearly 50000 yuan, entering within 300000 yuan.
Under multiple price reduction measures, Tesla delivered 484500 vehicles in the fourth quarter of 2023, a significant increase from 435100 vehicles in the third quarter. It was thanks to the price reduction and volume increase that Tesla was able to deliver 1.8086 million vehicles throughout 2023, achieving its target of delivering 1.8 million vehicles.
However, the industry is generally concerned that frequent and similar measures can only achieve short-term results. Tesla has previously disclosed its performance while issuing a warning that its vehicle (production/delivery/shipment) growth rate in 2024 may be significantly lower than in 2023.
After continuous price reductions, Tesla's own profitability has also been significantly affected. In the fourth quarter of last year, Tesla's gross profit margin fell to 17.6%, the lowest level since 2019. From the full year of 2023, Tesla's gross profit margin has significantly declined to 18.2%, a decrease of 7.35 percentage points from 25.55% in 2022.
This has also led many institutions to have pessimistic expectations for Tesla. A recent research report by UBS stated that due to factors such as slowing demand for electric vehicles in Europe and America, delayed launch of the Model 2, and slower Tesla production due to power outages, Tesla's electric vehicle delivery volume, earnings per share, and gross profit margin are expected to be lower than market expectations before 2026.
Some analysts also believe that Tesla's sales growth will stabilize in 2024 and decline in 2025.
Tesla, on the other hand, is hoping for a "lower cost" new model. During a performance conference call at the beginning of the year, Tesla CEO Musk revealed that the new low-cost car "has made considerable progress". He said, "According to the current schedule, Tesla's new products will start production at some point in the second half of 2025.".
However, UBS expects Tesla to launch a Model 2 model priced around $25000 in order to achieve accelerated growth. But this model is facing pressure in the low-end electric vehicle market that is rolling out of the sky. The institution expects that the sales of Model 2 will be very limited in 2025, and it will not be until 2026 that Model 2's sales will significantly increase, becoming an important source of revenue for the company.
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