Tesla will use its profits as a weapon in EV price war

Detroit — Tesla Inc makes more money on every vehicle it sells than any of its rivals worldwide.Currently Chief Executive Officer Elon Musk Using its excellent profitability as a weapon, it is developing its own EV price war.

Tesla was once one of the biggest loss-making companies in the auto industry, but over the past year it has built a commanding profit-per-vehicle lead over most major rivals. Reuters Analysis of industry data shows.

Tesla made a gross profit of $15,653 per vehicle in the third quarter of 2022. Volkswagen AG, four times the comparable figure Toyota Motor Corporation and more than 5 times ford According to Motor Co. Reuters analysis.

For most of this year, Tesla has joined its competitors in aggressively raising the prices of its most popular cars. Model Y SUVs. Shortages of semiconductors and other materials have held back production in the auto industry, allowing companies across the industry to focus on higher-margin models and post strong profits despite lower sales volumes. rice field.

Tesla’s decision to reverse course and spend its production cost advantage on price cuts now GM It has been pursued since the 2008 financial crisis and doubled during the pandemic.

To keep production costs down, Tesla has invested heavily in new manufacturing techniques. For example, replacing small metal parts with larger castings.Brought to you by Tesla battery We keep manufacturing and other parts of the supply chain in-house to standardize vehicle designs and improve economies of scale.

Using production cost advantages to finance markdowns has a long history in the automotive industry.

Mr Henry Ford Marking down his Model T in the early 20th century century when his revolutionary mass production system was revived. From the 1980s to the 1990s, Toyota It used the cost lead provided by its lean production system to deliver features at a price that Detroit automakers struggled to match. Now Toyota is rebooting its strategy under pressure from Tesla.

the growth of Electric car Demand will surpass the entire US and global market in 2022. This has pushed automakers to push the price of electric vehicles higher.Ford raised the price of its electricity F-150 40% increase in 2022.

Increased capacity

But analysts warn that the global EV market could soon have more capacity than demand.

By 2026, North American EV demand will reach a level of about 2.8 million units annually, said industry forecaster Warren Brown. But his EV factories in North America could assemble more than 4.5 million of his vehicles, with overall utilization at just under 60%, he said.

of Chinathe end of central government subsidies has fueled a market share war between rivals in the world’s largest EV market.

“Tesla has taken the nuclear option in China to bully weaker, thinner-margin players,” said Bill Russo of Shanghai-based industry consultancy AutoMobility.

Startups such as China’s Xpeng Inc benefited from Tesla’s price hikes. Now Xpeng is cutting prices in China, but it can’t afford to afford Tesla. Xpeng reported a gross profit of $4,565 and a net loss of $11,735 per vehicle in the third quarter, according to company data analyzed by Reuters.

“After we make our cars increasingly affordable, we hope smart cars will be accessible to more people,” Xpeng said in a statement.

Vietnamese EV startup Vinfast said Thursday use price promotions Fight back at Tesla.

BYD Co Ltd, a leader in China’s EV market, has announced price increases effective January 1 after Beijing phases out EV subsidies. BYD has so far not reacted to Tesla’s latest price cut in China. But BYD’s gross profit per car is $5,456, and in price competition, VolkswagenToyota or GM.

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https://www.autoblog.com/2023/01/22/tesla-price-drop-strategy/ Tesla will use its profits as a weapon in EV price war

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