During the National Day, Tesla’s price-cutting news gave owners a “fried pot” and the model 3’s standard battery life upgrade subsidy dropped to 249,900 yuan. Tesla has made several price changes since the Model 3 went on sale in 2019. This “unprepared” price reduction so that many car owners just picked up the car self-deprecating and was “cut vegetables”, in the Tesla officials micro-message hope to get compensation. Tesla then responded by giving away three years of free overcharge benefits as compensation for owners who met the seven-day confidence plan.
In fact, in February, when Innings received an order to supply lithium batteries for Tesla’s home-made Model 3 and Model Y, there was occasional news of Tesla’s price cuts. As Tesla’s pace of localization has intensified, its price-cutting space has once again sparked speculation. Cui Dongshu, secretary-general of the U.S. Federation of Passenger Federations, believes there is still plenty of room for price declines as Tesla continues to push down costs. Ping An Securities Research Report pointed out that the comprehensive product gross margin and model positioning, 200,000 yuan or domestic Model3 price bottom line, the first half of next year is expected to usher in another price reduction.
Tesla sold 310,000 worldwide in the first three quarters of 2020, still some way short of the 500,000 target set at the start of the year. In addition, Tesla, which received special care in Shanghai, has a series of agreed goals to accomplish. Under all the pressure, will Tesla continue to trade price space for market space?
Tesla has cut 叒 price again.
On October 1st, just after the National Day holiday began, Tesla sent a gift pack. Tesla China’s official website shows that the price of the Chinese-made Model 3 Standard Battery Upgrade was reduced to 249,900 yuan, while the price of the Chinese-made Model 3 long-range rear-wheel drive version was reduced to 309,900 yuan.
After this round of the latest price adjustment, the domestic Model 3 standard battery life upgrade subsidy after the price reduction of 21.65 million yuan, the domestic Model 3 long-range rear-wheel drive version price reduced by 34.15 million yuan. It is worth noting that the new standard battery life Model 3 will be equipped with lithium iron phosphate battery, while the long-life rear-wheel drive version will still use a three-dollar lithium battery.
This year, Tesla in the car price adjustment, April 24 in order to adapt to the subsidy-related provisions, Tesla announced the Model 3 standard battery life upgrade and long-life version of the price increased by 4,500 yuan and 5,000 yuan, model 3 standard battery life upgrade subsidy after the price of 303.55 million yuan, the long-life version of 344.05 million yuan, Tesla in China the minimum price returned to more than 300,000 yuan.
Then, on May 1, Tesla adjusted the price of the Model 3 Standard Life Upgrade, which was reduced to 271.55 million, with no price reduction for the long-range version. On May 27th Tesla cut the base price of imported models models models sold in China, the Model S and Model X, by 29,000 yuan, while over-enriching the line in accordance with the principle of using billing.
Most in the industry are surprised by Tesla’s price cuts. Xiaopeng Automobile founder He Xiaopeng has previously said on Weibo, “I judge the probability of the domestic model3 long-range version of the subsidy will be reduced to 2775 million, 615,000 lower than the current price of 339,000, close to last year I said the price of domestic Tesla can be reduced by another 10,000 U.S. dollars.” Cui Dongshu to Sina Finance said, “Now the new energy car is still more expensive, the car is to sell low prices, Tesla costs are relatively low, (price) there is still a lot of room for decline.” “
Tesla price bottom space guess.
So how much room does this price bottom out have? From the feasibility analysis, Tesla’s localization process step by step, for the cost control effect is also significant. According to Ping An Securities Research Report, comprehensive gross margin and model positioning, 200,000 yuan or domestic Model3 price bottom line, the first half of next year is expected to usher in another price reduction.
For the price reduction space, Ping An Securities analysis said that through the Model3 cost split, the average bill of materials (bill of materials) cost is expected to be about $314,000, accounting for about 82% of the total vehicle. It is expected that after achieving 100% localization rate, the cost of model3 standard battery life upgrade bike decreased by 29% compared to the U.S. version, and the cost of long-range rear drive version decreased by 23%. If we maintain a steady gross margin of 25% and achieve a 100% localization rate, Ping An Securities believes that the lowest price of domestic Model 3 will be reduced to 20-220,000 yuan.
Tesla explained in a earnings call that construction costs at the Shanghai plant are 65 percent lower than in the U.S. (in terms of capital expenditure per unit of capacity). Morgan Stanley estimates that labor costs at the Shanghai plant could be nearly 90 percent lower than in the U.S., and that the cost reduction could boost bike profit margins by 30 to 35 percent.
On the other hand, is Tesla’s price cut inevitable?
In the third quarter of this year, Tesla delivered 139,300 new cars worldwide, of which 15,200 were model S/X and 124,100 were Model 3/Y. One of the best-selling models in China Model 3 in the first eight months of the cumulative sales of 68,579 units. For the full year, Tesla completed sales of 318,350 vehicles, and to meet the 500,000-volume delivery target set at the start of the year, Tesla needed to complete more than 180,000 deliveries in the fourth quarter. So will Model 3 be its most critical piece in the Chinese market?
In addition, Tesla needs to complete a series of agreed goals while enjoying the financial, loan and land support provided by Shanghai. It is reported that the Shanghai port area requires Tesla to invest 14.08 billion yuan over the next five years, and by the end of 2023 to achieve more than 75 billion yuan in output value, as well as generating 2.23 billion yuan in annual tax revenue, if not completed will be returned to the land.
Tesla founder Musk has mentioned more than once in public whether Tesla will continue to trade price space for market space to launch electric cars that everyone buys and drives, and how far away is it from the day Musk’s vision is realized?
Wen and Li Shiyun.