At the beginning of 2023, Tesla has launched a price war. In just two weeks, it has announced price cuts in more than a dozen countries around the world, with a maximum drop of more than 20%.
Faced with Tesla's aggressive moves, will other car companies follow suit?
Tesla's Global Price Cuts
In the United States, Tesla lowered the prices of several models. Among them, the high-performance version of Model 3 dropped by 14% to $53,990, and the Model Y long-range version dropped by nearly 20% to $52,990.
According to data from TroyTeslike, an independent research institution for the new energy vehicle industry,
after the price reduction, the above-mentioned models are eligible to enjoy the $7,500 electric vehicle tax credit mentioned in the "Inflation Reduction Act". 26% and 31%
.
Last year, Tesla cut prices twice in the U.S. market.
In Europe, Tesla lowered the prices of Model 3 and Model Y in Austria, France, Germany, Italy, the Netherlands, Norway, Switzerland, the United Kingdom and other markets.
Taking the German market as an example, foreign media reported that the price cuts for the above-mentioned models with different configurations ranged from 1% to 17%.
In December, Tesla beat out Volkswagen, with the Model 3 becoming the best-selling electric car in Germany and the Model Y the second most popular, according to the data.
The reduced price of the Model 3 is comparable to that of Volkswagen's entry-level electric car, the ID.3.
In the previous week, Tesla China reduced the prices of the domestic Model 3 rear-drive version, high-performance version, Model Y rear-drive version, long-endurance version and high-performance version.
According to foreign media calculations, the latest price is four months lower It fell 13% to 24% before, and the price hit a record low.
On the same day, Tesla also made price cuts in Japan, South Korea, and Australia.
Fan Boxuan, a technology industry analyst at Sirui Investment, said in an interview with a reporter from China Business News
,
“In 2023, the demand in the US market will be weak, the subsidies in the European market will gradually decline, and the penetration rate in the Asian market will gradually reach its peak. The industry may not be able to reproduce the growth rate of 2022. Looking forward to 2023-2025, the compound annual growth rate of global electric vehicle sales has a downside risk of returning to 22%.
”
Fan Boxuan further explained that the slowdown in industry growth has been reflected in Tesla's order volume. In addition, its mainstream models have been on the market for a long time and iterations are limited, so Tesla chose to cut prices.
"The data shows that the company's global order backlog is continuing to shrink, reflecting to a certain extent the reality that its demand increase is not as good as the production capacity increase. The starting point for Tesla's price reduction is to prevent the order increase from falling too fast." He said that after the price cut , Orders are expected to achieve month-on-month growth, but the growth rate of orders will slow down significantly after the impulse stimulus brought about by price cuts.
Share in exchange for profit
A number of Tesla bullish analysts recently published reports saying that competition in the global new energy vehicle industry has intensified, and Tesla's latest move may have an impact on its profit margins.
Gene Munster, managing partner of fund company Loup, said, "Tesla's profit margin will be hit hard. The combined impact of global price cuts will reduce its profit by 25% this year. The view that Tesla's profit margin is unsustainable is solid. Reliability." However, he also said that this move is also a win-win situation for consumers and Tesla, which will help Tesla increase its market share.
In a report published on the 13th, Dan Ives, managing director of brokerage Wedbush, said that Tesla is taking aggressive actions in response to continued weakening demand.
"This move will hit profit margins. At the beginning of the price cut, Wall Street has a negative view, but we believe that this is the right decision made at the right time, and we are optimistic about Musk and his company's price reduction strategy."
Ives said that Tesla has greatly expanded its production scale globally, making profit management flexible and able to absorb price reduction measures, and the entry into force of tax relief will become a new positive.
"
We expect that global price cuts may stimulate Tesla's global demand/delivery to increase by 12% to 15% in 2023.
Tesla has issued a clear warning to European car companies and American giants including GM and Ford. In a price war, Tesla will not be lenient."
Will more car companies join the battle in 2023?
So, will other car companies around the world follow suit and lower prices?
A brokerage strategist who did not want to be named told the first financial reporter, "Price cuts are feasible for Tesla, which can sacrifice profits in exchange for market share, but not all car companies can fight price wars without scruples. The cost is too high. Many car companies can’t afford it, and if they hit it, they will lose money.”
He said that the breakeven line of the electric vehicle industry is about 300,000 vehicles per year, that is, the company will start to make profits if the annual delivery exceeds 300,000 vehicles.
He took Tesla as an example. The car company delivered 368,000 cars in 2019, and achieved a net profit of 720 million US dollars for the first time the following year. It has remained profitable since then and is currently one of the few profitable electric car companies.
"On the other hand, China's 'new car-making force' is still far away from the break-even line, and does not have the conditions to fight a price war."
In 2022, the total annual delivery volume of "Wei Xiaoli" will be 122,000, 121,000 and 133,000 respectively.
Fan Boxuan also believes that "new forces" will not follow suit and lower prices.
"The current price of the domestic Tesla Model 3 rear-drive version is lower than the price of Xiaopeng P7, and the product tonality no longer matches the positioning of luxury cars. Due to factors such as gross profit margin and brand positioning, domestic new energy car companies may not necessarily They
will follow blindly.
Forging iron requires self-improvement, and the core problems faced by the 'new forces' are the polishing of existing products, brand image and consumer services, and price cuts will not solve these problems." Fan Boxuan said.
As for overseas car companies such as Europe and the United States, he also does not expect to have a drastic reaction to Tesla's price cuts.
"On the one hand, the products of overseas electric car companies are quite different from those of Tesla, and the positioning of Model 3 and Model Y will not affect the potential customer base of the former. On the other hand, for traditional cars such as Mercedes-Benz, BMW and Audi For enterprises, how to achieve market recognition in terms of product positioning, rather than being regarded as "oil-to-electricity" is the biggest challenge at present."