Source: Ya Ya Hong Kong stock circle

Musk recently said that in anticipation of the recession, the trade-off between car prices and profit margins: in order to keep demand unchanged, car prices have to be lowered. If you want to increase demand, you must further reduce the price of cars.

Soon, a week after Musk said this, Tesla, Inc. ushered in a sharp price reduction, the price war of domestic electric car companies officially began, and domestic manufacturers had been fighting for prices. Tesla, Inc. has not been ruthless, and Tesla, Inc. directly one step in place, will be a serious threat to the 20-300000 price range of car companies.

The prices of all Tesla, Inc. 's domestic models have been reduced, starting at 229900 yuan for Model 3 and 259900 yuan for Model Y, according to Tesla, Inc. 's official website. In addition, Tesla, Inc. announced a cut of about 10 per cent in the prices of Model 3 and Model y in Japan.

The specific price reductions are as follows: Model 3 rear wheel drive version by 36000, Model 3 high performance version by 20, 000, Model Y by 29000, Model Y long-lasting version by 48000, and Model Y high performance version by 38000.

Judging from the price chart, the price of Tesla, Inc. was at its highest level in nearly two years in mid-2022, and began to be lowered in October, this time directly to the lowest price in history.

The reason for the price reduction is very direct, that is, the decline in demand for Tesla, Inc., with high profit margins as a safety cushion, a sharp price reduction to compete with Chinese electric car enterprises.

On the same day that Tesla, Inc. cut prices, Tesla, Inc. delivered 55796 Chinese-made electric vehicles in December, the lowest level in five months, according to sales estimates released by the Federation of passengers. The figure was down 44 per cent from November and 21 per cent from a year earlier.

The decline in demand is the main reason for the sharp drop in delivery volume from the previous month. In response to the decline in demand, Tesla, Inc. 's Shanghai factory suspended production from December 24 to January 2, and Tesla, Inc. is also expected to stop work during the Lunar New year.

As we mentioned last week, this is a rare shutdown at Tesla, Inc. 's Shanghai factory. As the factory with the strongest production capacity, the Shanghai super factory used to have very full orders and was in short supply for a long time. In the past, even during the Lunar New year, the Shanghai super factory would not have a holiday. If the Shanghai factory with the highest production capacity had a holiday during the Lunar New year, that means that the demand side has indeed fallen a lot.

There are two reasons for Tesla, Inc. 's insufficient demand.

First, consumer demand has declined compared with the peak demand in 2022, which is what all car companies will face. Due to the introduction of a new energy policy in 2022, consumer demand was fully released in the last few months. However, after entering the fourth quarter, the month-on-month growth in delivery volume was so difficult that it was unable to maintain a high growth rate. In addition, last year's high base, this year's data to maintain high growth is more difficult to achieve.

The second reason is that Tesla, Inc. 's main selling model has been on the market for several years, although there are updates in the software, but there is no replacement in terms of configuration and models. This creates opportunities for competitors. Domestic electric car companies have gradually surpassed Tesla, Inc. in this respect, and consumers have more and more choices.

Tesla, Inc. 's price reduction has made many car owners feel angry. The car they just bought a few days ago will be reduced by tens of thousands at a time. The online rights protection group has been established, and all car owners have reported their own "loss amount". There are rumors that car owners want to collectively pull banners to protect their rights, and some netizens joked, "Don't go, pull banners and put in 200 banners."

Car owners can understand the uncomfortable mood, from another point of view, Tesla, Inc. 's price reduction will threaten many car companies, especially those in the range of 20-300000.

Tesla, Inc. in this price reduction, has come to XPeng Inc. 's price range, the market is worried that Tesla, Inc. to come to this price range will "roll XPeng Inc. to death".

Some investors asked XPeng Inc. whether he would reduce the price. XPeng Inc. insiders responded: XPeng Inc. has his own sales rhythm and will decide product prices and promotional activities according to his own situation, rather than following other car companies.

However, as XPeng Inc. is in the situation of selling more and more at a loss, XPeng Inc. can not even reduce the price, the price reduction may restore demand, but the loss will be even greater. Tesla, Inc. this price reduction makes unprofitable car companies fall into a passive, in the end is to follow the price reduction to grab demand? Or do nothing?

As for how much harm Tesla, Inc. can bring to XPeng Inc., XPeng Inc. 's share price has already reacted. Today, XPeng Inc. 's share price closed down 6.82%, once down more than 8%.

It is worth noting that in recent days, some car companies that make hybrid models have announced price increases in response to the withdrawal of state subsidies for new energy.

Under the 2022 national subsidy policy, the subsidy for plug-in hybrid models is 4800 yuan, 9100 yuan for new energy vehicles with a range of 300,400km, and 12600 yuan for those with a range of more than 400km. The withdrawal of state subsidies this year means that the cost of new energy vehicles has increased by about 10,000 yuan, and whether this part of the cost will be borne by car companies or transferred to consumers depends on the choice of some car companies.

In any industry, high profit margin is the basis of bargaining power. At present, other electric car companies have not yet made a profit, which gives Tesla, Inc. the initiative. Even when demand is declining, Tesla, Inc. can sacrifice profits in the short term to fight for more demand, especially when Tesla, Inc. makes money selling a car, while most car companies lose money when they sell a car.

At present, Tesla, Inc. 's product competitiveness is lower than that of two or three years ago, and Tesla, Inc. 's price adjustment space is the largest in the industry, and it is also the only company in this range that makes money, which means that Tesla, Inc. is capable of going through this cycle of demand decline.

However, Tesla, Inc. 's disadvantage is that there will be no new products in the short term, especially within this year, more and more Chinese car companies will launch new models, while Tesla, Inc. will not be able to launch a new model, model 2, which makes Tesla, Inc. fall into a passive position in competitiveness, but fortunately, he can reduce prices to make up for this shortcoming and try his best to get through the stage of passive competitiveness.

The market is more concerned about the impact of Tesla, Inc. 's reduction in price on profits?

Foreign investor New Street believes that between Q4 in 2022 and Q4 in 2023, Tesla, Inc. can reduce the average selling price by 8 per cent without affecting profit margins.

He is based on improved supply and input costs due to increased capacity at factories in Berlin and Texas, large subsidies from the US government and reduced shipping costs for Chinese factories to Europe.

Two new plants in Berlin and Texas are losing money on production in 22 years, but a huge breakthrough has been made in capacity climbing in 2023. It turns out that if you export from a Shanghai factory to Europe, you have to pay a 10% tariff and a high freight.

At present, the production capacity of the Berlin factory has finished climbing, and the Shanghai factory can no longer be responsible for the demand in Europe, saving shipping fees and tariffs, which can greatly reduce costs.

Judging from the delivery data for the fourth quarter of last year, there has been a great improvement. For the whole of last year, Tesla, Inc. delivered about 200000 vehicles in Europe, but the number of vehicles delivered in the fourth quarter alone reached 90, 000.

In addition, in 2023, the US government introduced a huge subsidy for electric cars, with a full subsidy of 7500 US dollars, which gave Tesla, Inc. room for further price reduction. However, due to Tesla, Inc. 's little competitive pressure in North America, it is expected that Tesla, Inc. 's price reduction space in North America may not be too big.

Conclusion

Although Tesla, Inc. 's short-term price reduction is bound to lead to a decline in profits, Tesla, Inc. is still a very profitable car company, and other competitors are still losing money, which is the most crucial. after all, the valuation of electric car companies is no longer based on the amount of delivery. in the end, it depends on how much money the car company can make.

However, I have to say that Tesla, Inc., who can not come up with a new product, will not be so easy in 2023 when the competition intensifies. This year will be a year to test Tesla, Inc. 's operational ability. How to achieve the best at the cost side and provide room for expanding price reduction for the lack of product power? How should domestic car companies take the job?

Edit / Corrine