Tesla raised prices 4 times a month, it may be holding back a “big move”

In the past month, Tesla has increased its price four times.

  • On October 27, the price of Model Y high-performance version was increased by 14,000 yuan.
  • On November 9, the price of the Model 3 long-range refreshed version was increased by 1,500 yuan, and the price of the Model Y long-range version was increased by 2,500 yuan.
  • On November 14, the price of the refreshed version of Model 3 was increased by 1,500 yuan, and the price of the rear-wheel drive version of Model Y was increased by 2,500 yuan.
  • On November 21, the price of the Model Y long-range version was increased by 2,000 yuan.

In total, the Model Y high-performance version has the largest increase, which is 14,000 yuan, followed by the Model Y long-range version, which has an increase of 4,500 yuan, and the other models are all "small purchases" ranging from 1,500 yuan to 2,500 yuan. In the end, the prices of Tesla’s two main-selling models fell into:

  • Model 3 refresh version 261,400 yuan
  • Model 3 long-range updated version 297,400 yuan
  • Model Y rear-wheel drive version 266,400 yuan
  • Model Y long-range version 304,400 yuan
  • Model Y high-performance version 363,900 yuan

Such frequent small price adjustments are very rare in the Chinese market where new car prices are getting higher and higher. Tesla's unusual move has attracted widespread attention from both inside and outside the industry, trying to understand the reasons for Tesla's repeated price increases.

Model 3 and Model Y will also see price increases this week due to rising costs.

The Securities Times reported on the 20th, citing a Tesla salesperson, that there were two main reasons for this round of price increases: high pressure on the production line and rising production costs. Finally, as the salesperson said, Tesla adjusted the price of the Model Y long-range version during the week. However, the wave of price increases does not seem to stop.

On the 22nd, the "Securities Times" published another article, stating that "the first three adjustments have completed the price increase of all models." The price increase on the 21st may be the beginning of the second round.

Why is it rising?

Tesla's pricing strategy has always been based on cost.

The third quarter financial report shows that due to the pressure of falling car sales prices and rising costs, Tesla's revenue and profit indicators have declined. Total revenue fell by 9% year-on-year, and gross profit fell by 22% year-on-year, falling to the lowest level in four years. , GAAP net profit fell by more than 40%.

Tesla attributed the decline in net profit to a variety of reasons. First, underutilization during the factory upgrade period has led to a decline in deliveries; second, the operating expenses of the Cybertruck, which is about to be released, have increased; in addition, Tesla is also investing heavily in artificial intelligence.

In order to make up for the gap in product strength, Tesla carried out a strong and long-lasting price reduction promotion in the first half of this year. The Model Y long-range version with the largest price reduction was as much as 85,000 yuan, causing an uproar – not only This is reflected in public opinion and also in skyrocketing sales.

In terms of products, Tesla brought a slight upgrade to Model Y in October. Multi-color ambient lights were added to the interior, and newer technical fabric materials were used for the dashboard trim and front door trim. The appearance was updated 19 inch twin star wheel design.

The above series of reasons forced Tesla to make efforts to save the gross profit margin of the red light.

However, increasing its own profit margins and regaining its price advantage may not be Tesla's only purpose. It is equally important for them to release price increase signals to the market.

According to data from the Passenger Car Association, Tesla China delivered 72,115 new cars in October, down 2.6% from 74,073 vehicles in September. Long-term substantial price cuts are bound to cultivate a wait-and-see mentality among some consumers. Using small price increases to make the market aware of price reversals is probably one of Tesla's "little tricks". The sales staff's "Don't hesitate, hurry up." "Single" and other words can also support this point to a certain extent.

In order to "urge" consumers to place orders, Tesla has recently launched promotions for referral orders and test drives.

Specifically, before December 31, users who order Model Y/S/X through referrals and pick up the car within the validity period can enjoy a 1,750 yuan final payment deduction and a 90-day trial of the EAP enhanced assisted driving system. At the same time, the car owner who serves as the referrer can also receive a reward of 7,000 points; before December 1, Tesla owners can also receive "overlay benefits", and each time they invite a friend to the store to complete a test drive, they will receive 500 points. Rewards can be obtained up to 3 times.

In terms of product positioning, the price of the newly launched Model 3 refreshed version has not continued to decrease as the market expected. Instead, it is about 30,000 yuan higher than the old model. The price gap with Model Y has been forcibly narrowed. The two models There is a certain degree of internal competition in the car, and Tesla needs to increase the price to rebuild the value of Model 3.

From the perspective of revenue, sales volume and products, Tesla’s price adjustment is in line with commercial rationality. However, considering that the end of the year is approaching, Tesla may have another hidden purpose: to prepare for the "year-end sale."

I'd be willing to cut EV prices again during turbulent times, and even though it would impact gross margin, I'd be willing to sacrifice it in exchange for volume growth.

Musk once said this. Despite experiencing a decline in deliveries in the third quarter, Tesla's delivery target for 2023 remains at 1.8 million vehicles, which means that to achieve this goal, Tesla's delivery volume in the fourth quarter will be close to 476,000 vehicles.

Price cuts have always been Tesla's trump card to boost sales.

Why can it rise?

Tesla's flexible pricing strategy is directly related to its direct sales model, which is fundamentally different from the dealer model adopted by traditional car companies.

At the beginning of the 20th century, an ordinary car cost more than 3,000 US dollars, and the annual income of the average American family was only about 500 US dollars. Therefore, cars were only toys for the rich at that time.

Until Ford introduced the Model T.

In October 1908, the Ford Model T was officially launched on the market. The basic model, excluding the roof and windshield, had a starting price of only $850. The following year, Ford also launched a flat-top model, with the price reduced to US$550, truly bringing the car into the homes of ordinary people.

The relatively low selling price of the Model T is due to the establishment of a large-volume assembly line production system. Ford has greatly reduced production costs through refined division of labor and streamlined operations, while effectively reducing differences in product quality, thereby establishing standardization , high-efficiency production system.

Now that the production problem is solved, the next thing to consider is how to sell the car. The United States is a vast country, and if Ford sells directly to consumers everywhere, transportation and storage costs will be extremely high. Eventually, they decided to introduce independent regional dealers, allowing them to distribute and retail cars within designated areas. At the same time, Ford has also set up parts centers across the United States, which has greatly improved maintenance efficiency.

Subsequently, with the promotion of Ford, General Motors and other companies, the dealer model gradually became the mainstream sales model in the entire industry. In the 1990s, as China ushered in a period of rapid growth in the automobile market, dealer models that could effectively combine various businesses such as finance, insurance, and used cars began to become popular.

In the automotive field, dealers are like a bridge connecting OEMs and end consumers. They use their own financial and channel resources to complete the connection of the industrial chain, assist OEMs in balancing supply and demand, expand the coverage of brand sales, and explore more potential user.

However, the dealer model also has its drawbacks – the long sales chain makes pricing less clear.

For a long time, the traditional automobile industry has followed the dealer model, allowing OEMs, regional agents and terminal stores to form a complete and complex sales pipeline. Cars are rolled off the assembly line from the factory, warehousing and transshipped by agents, and finally delivered to consumers.

The problem is that the terminal selling price of a product needs to take into account the cost of each link. Faced with the price quoted by the dealer, it is difficult for consumers to judge the rationality of the price. The opaque price system actually encourages consumers to Wait and see mood. The direct sales model adopted by Tesla has transparent prices, and there will be no "one price for one store, one price for each car". Through the direct sales model, Tesla can reduce three major costs for car owners: car purchase cost, usage cost and time cost.

Consumers do not need to compare prices everywhere when buying a car, and car companies can respond to the market in a more timely manner. After Tesla successfully tested the waters, "Wei Xiaoli" and even some traditional car companies in transition began to take the road of direct sales.

However, not everyone is suitable for direct sales.

Automobile manufacturing is a typical heavy-asset industry, and the operation of cash flow is crucial to the company. The direct operation model will occupy a large amount of working capital of automobile companies. If you fail to achieve good sales in the short term and fail to obtain external blood transfusions in time, you are likely to go bankrupt due to a short-term break in the capital chain.

Compared with the manufacturer's independent sales, the introduction of dealers can disperse operating risks. Although the manufacturer transfers a part of the profit, it will be replaced by a more stable cash flow.

The symbiotic coexistence of dealers and manufacturers has been established for many years, but the direct sales model is impacting the traditional framework. In the short term, dealers still have a lot to play. After all, they are the last mile of the automotive industry.

However, under the wave of electrification and intelligence, direct operation and agency, self-operation and authorization will also find a new balance in the rounds of price controls.

Anyone with wheels is interested and welcome to communicate. Email: [email protected]

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