Tesla cuts Model Y prices in China and increases competition

A few hours ago the economic data for the second quarter of Tesla was presented, where the American manufacturer has indicated that the price war is making a dent in its margins. But despite this, Elon Musk is still determined to increase volume at any rate and has confirmed the drop in prices for Model Y and new promotions for Model 3.

As we have said, Tesla has indicated in its economic summary for the second quarter that the commercial margin for sales has dropped from 25% to 18.2%.

This a significant decline that Elon Musk himself has defended, indicating that Tesla will continue to reduce prices during these “turbulent times.” Musk bluntly stated that it is reasonable to sacrifice vehicle profit margins in exchange for more production and also proposed raising the price of the fully autonomous driving (FSD) system.

After these statements, Tesla confirmed that the first movement, as usual, will be made in China. There the Model Y Long Range will go from 313,900 yuan to 299,900 yuan. 4.4% less. For its part, the Performance variant will drop from 363,900 yuan to 349,900 yuan. A reduction of 3.6%.

This translated to the rates in Europe would mean a reduction of between 2,156 euros for the Performance version and 2,349 euros for the Long Range. Something that would leave the price of the latter at 51,050 euros. Touching the psychological barrier of 50 thousand euros.

Tesla’s goal would be to continue increasing demand for its models, sacrificing profit margins in exchange for expanding a range that will be able to offer additional performance thanks to software. Software where the fully autonomous driving system promises to become the goose that lays golden eggs in the not-too-distant future.

Musk himself has indicated that this system will increase the value of Tesla between 5 and 10 times and that the $15,000 that it currently costs will continue to increase according to the capacities that the head of the brand indicates this year will be able to reach. a Level 4.

The point is that Tesla’s margin is still very high, but the brand is preparing for a different future scenario.

For example, according to Bloomberg data, Tesla earns about $10,426 per unit sold. This figure compares to the barely $1,224 that BYD earns for each car it sells. This is 8.5 times more for Americans.

Tesla Model Y

Another example of the direction that Tesla has been positioned in is revenue outside of car sales. In 2020, just 5% of Tesla’s revenue structure came from the software business. Estimates are that by 2025, this figure will increase to 30%. 

Something that indicates that, quite possibly, Tesla will continue in the direction of price reduction in the coming months and years, while significantly increasing the income of the ecosystem of electric cars whose business model has changed drastically concerning those of combustion.

Elenor Kling

A tech lover and generally a car enthusiast who likes to do a lot of research and share knowledge.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button