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Tesla's Q1 earnings: Boon or bane for its global price cuts?
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73276501 joined discussion · May 7, 2023 19:12

Tesla raises prices, Musk closes net

$Tesla(TSLA.US)$ Since last year, Tesla has been rushing all the way to the forefront of the price war. At the beginning of this year, Tesla made a significant price reduction of 20 to 48 thousand yuan for both models of Model 3 and Model Y.
However, recently, Tesla's official website suddenly modified the price and increased the price of Model 3 and Model Y models in China by 2,000 yuan, and the starting price of Model 3 rose to 231,900 yuan and the starting price of Model Y rose to 263,900 yuan.
This round of price increases is not only for the Chinese market, Tesla's U.S. official website, Model 3 and Model Y also rose by $250 each.
Because the increase is very small, this round of adjustment brings a lot of entertainment to the interpretation, for example, some car bloggers even think it is not worth mentioning; some people say, "the price increase is to subsidize the exploding Space X"; or Tesla CEO Elon Musk OCD outbreak, in order to adhere to the 20% gross margin of performance bottom line, Tesla gross margin of 19.3% in the first quarter of 2023, after a price increase of $2,000, the subsequent gross margin can just reach the 20% bottom line.
Another way of putting it is that, as Tesla has also had a record of small increases before the drop, this time it is likely to rise 2000 turn around and drop 40,000.
2000 yuan, of course, money is not much, but after all, when the price war is hot, suddenly changed midway, it really makes people a bit confused.
In fact, the reason for this adjustment, although not in the price increase at the same time official announcement, but Tesla has already done a preview of the price adjustment.
Not long ago, Tesla Q1 results conference call after the earnings conference, Musk and others have answered the question.
At that time, an analyst asked what kind of price trend is now? How does the company conduct internal discussions?
Tesla responded that the company will understand the previous day's orders and production volumes and the relationship between them in real time every day, and will integrate data from all sources for a comprehensive analysis of our current capacity, orders, and then based on such data to pricing.
In addition, according to domestic media reports, automotive blogger @Berlinergy also tweeted that Tesla is automatically adjusting car pricing for the global market based on a complex model that management revisits on a weekly basis. Among the decision factors allegedly include capacity, macroeconomics and more.
This is consistent with what Tesla said at the earnings meeting.
And at the earnings meeting, asked about the global orders since the latest round of price hikes, Tesla said the orders exceeded production. The orders are the results of the last round of price war, but after repeated price cuts, also triggered a "wait and see party" wait-and-see mood.
Tianfeng securities electric new team in the research report pointed out that the previous two months Sla order conversion rate of about 60%, consumers wait and see heavy emotions, only order not to mention the car. And the price increase is timely release of the inflection point signal.
Fine-tuning the price on the one hand can quickly recover the results of the war, on the other hand, of course, can also repair the gross margin.
As for the previous rumors have been Tesla will again start price cuts, is also a reasonable expectation. After the news of this price increase by Tesla, a number of auto industry insiders believe that the price war is not over, the future price of the whole car will continue to go down.
In other words, Tesla will still continue to reduce prices, but this will be after the recovery of orders in major global automotive markets. The basis for this judgment includes Tesla's lagging growth rate relative to its main competitors. In the first quarter of this year, Tesla's sales in China were 137,000 units, up 26.9% year-on-year, while BYD's figures were 508,000 units and 80%, respectively.
In addition, the current average price of battery-grade lithium carbonate is reported to be below 200,000 yuan per ton, and according to previous media reports, the actual industry transaction price is even lower.
In terms of price war, Tesla is still the most powerful opponent of domestic auto brands. On the one hand, the gross profit margin of Tesla in the first quarter of this year, although lower than expected, but still better than domestic brands. Compared to Tesla's 19.3% gross profit margin, BYD also only 17.8%.
If you compare the figures before the price war, the gap is even more obvious. 2022, BYD, Azera, Ideal, Xiaopeng gross margin were, 20.39%, 10.4%, 19.4% and 11.5%, while the 2022 Tesla car gross margin was 28.5%.
An automotive industry source pointed out that the gap is more obvious is the net profit. Financial data show that in 2022, Tesla achieved an operating margin of 16.8%, while the net profit margin of BYD's entire vehicle business is only 2.05%. Azera, Ideal and Xiaopeng all had negative net profit margins for the year, at -29.6%, -4.4% and -34%, respectively.
As still in the early stages of development, the new forces of car-making also have product development, capacity investment and reasonable layout of the supply chain and other inputs, but in this person's opinion, in addition to these factors, Tesla's production methods also need domestic brands to try to catch up.
In his opinion, Tesla's gross profit margin is about two times that of general enterprises, but the net profit margin is almost ten times that of general car companies, mainly because Tesla has cost control to the extreme, to the Shanghai super factory, for example, the main cost is the cost of manufacturing, and other various operating costs are very little. Including basically no marketing costs, non-production related staff is very small, not in the city or other places to get an office or R & D building and so on.
Musk himself has made no secret of the possibility of price reductions. He stressed that in the context of a soft economy, he would prioritize sales growth over profits, and before perfecting self-driving technology, Tesla would insist on selling more cars at lower margins to reap profits in the future.
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