Tesla price cut: I live, no one else can live

  The new energy vehicle industry ushered in a “blockbuster”. On October 24, Tesla officially announced that starting from now on, Tesla will reduce the price of all Model 3 and Model Y models sold in mainland China. This is not only Tesla’s first substantial price cut this year, but also the first time a car company has chosen to take the initiative to cut prices under the circumstances that the prices of new energy vehicles have generally risen this year.
Tesla cuts prices again

  When the pre-order activities of the “Double 11” shopping festival kicked off, Tesla, as a representative of car companies, took the lead in teaching everyone a lesson: I’m going to cut prices again! The main products, Model 3 and Model Y, have undergone major price cuts, ranging from 14,000 to 37,000 yuan. Tesla, which has never liked to do publicity, even made a poster thoughtfully, and I don’t know how old customers feel.
  Tesla has always adopted a direct sales model. Unlike the dealer model, which has regional restrictions and inventory, there will be a buffer period. As long as it lowers the price, regular customers will be very hurt. I treat you as true love, but you treat me as a leek? Tesla’s sales staff should wear several layers of masks to avoid being scolded for breaking their defenses. After all, it is impossible to get money back. Remember to pick a good day when you buy a Tesla next time. Because Tesla will not be the last price cut, and it even has a lot of room for price cuts.
  So, here comes the problem. The products launched by other car companies are more expensive than the other. Why do you have to cut prices at Tesla? Is it because the car is not easy to sell, or is it that old customers are no longer treasured?
With repeated price cuts, what is Tesla’s confidence?

  In fact, this question involves two aspects, internal and external.
  The interior is Tesla’s unique model, which uses repeated price cuts to set off a flywheel effect.
  Tesla’s flywheel structure is designed in this way: with lower product sales prices, more customer attention and visits will be brought in. Tesla bears Musk’s huge personal IP halo, and every price cut can attract attention , Do not mention the feelings of old customers, you say that new users and potential users are not tempted? Smiles don’t disappear, they just transfer from old customers’ faces to new ones.
  With more visits and attention, more sales can be brought; with greater sales, greater production can be brought; with greater production, production costs can be continuously reduced; With lower costs, the market price can be lowered, and then enter the second cycle of the flywheel. Lower prices, extreme cost-effectiveness, and benefiting users are the eternal power of Flywheel and the eternal truth of the market.
  This set of flywheel effects, Musk has already played it with great proficiency, and it has been tried and tested repeatedly, which is comparable to Cook’s precise knife skills on Apple products. Of course, you may ask, won’t price cuts affect the company’s profits? But in the same way, price cuts will also lead to an increase in sales, not to mention Tesla’s cars, the profit margin is not low at all.
  Just a few days before the price cut, Tesla released its financial report for the third quarter of fiscal year 2022. Tesla’s total revenue in the third quarter was 155 billion yuan, an increase of 56% over the same period last year; 23.8 billion yuan, an increase of 103% over the same period last year.
  The overall gross margin for the automotive business in the third quarter was 27.9%. Compared with Tesla’s biggest rival, BYD, the domestic leader, the gross profit margin of the auto business in the first half of the year was 16.3%. Moreover, Tesla still has a little thought, if the Model Y is lowered to less than 300,000 yuan, it can enjoy state subsidies.
  In general, Tesla’s gross profit is high, and there is still more room for price cuts. They have indeed given discounts to new customers, and this cycle continues to keep the flywheel spinning. Of course, we can also summarize the flywheel effect of Tesla as a “total cost leadership strategy.”
  Tesla is very similar to Apple. They are both “technological religions” with extremely well-known brands. There are only a few main products in the category, and the sales volume is very concentrated, so the supply chain is relatively stable and has the right to speak. On the other hand, for BYD’s dozens of cars, the supply chain is more complicated when counted separately, and it is not easy to reduce the purchase price.
  But the biggest difference between the two is that Apple relies on its own technology and brand awareness to make a premium and monopolize the high-end market. Tesla is even more extreme. It uses the brand and supply chain as leverage to turn it into a scale advantage, and directly uses it for price competition. That is to increase sales, generate economies of scale, reduce costs, occupy categories, and increase profit margins. What does that mean for customers?
  I have told you before that the essence of customer demand is category, and only when there is category demand can we choose among brands. Everyone wants to buy new energy vehicles, so they think about whether they should buy Tesla, BYD, or Weilai, Xiaopeng, or Ideal?
  As long as Tesla lowers the price, it is equivalent to actively lowering the profit of the entire category and creating a price anchor. If other companies do not follow suit, then your brand is not as big as others, and the price is still more expensive than others. Why should I buy you?
  This is the significance of the total cost leadership strategy: ultimately reflected in the market, what can be perceived by customers is the price, not the cost of the enterprise.

  Customers don’t care about the cost of the company. They compare the prices of different companies. Tesla uses price cuts time and time again to influence the minds of users and make itself a representative of the category.
  Of course, in addition to internal factors, there are also external factors.
  Tesla’s sales target for this year is more than 1.5 million vehicles. In the first three quarters of this year, only 61% of the total target was completed, and there is still a gap of 600,000 vehicles waiting to be completed in the next few months.
  This means that Tesla will sell at least 200,000 vehicles per month in the fourth quarter. Faced with such pressure, Tesla has to trade prices for sales.
  Why did Tesla set such a high sales target? Two reasons:
  one is that Tesla has encountered an opponent.
  As a company that wants to lead the development of new energy vehicles in the world, it must maintain its absolute advantage in production and sales, but today BYD has surpassed Tesla in total with its rich product line.
  Moreover, BYD, like Tesla, is also actively going overseas to expand globally. Not long ago, a German company placed an order for 100,000 cars from BYD. The public broke their defenses when they heard it, BMW shed tears when they heard about it, Mercedes-Benz felt that their home was stolen, and Tesla’s eyes were red. Seeing BYD making money, It’s worse than losing money yourself.
  Therefore, in terms of brand image and popularity, BYD’s production and sales surpass Tesla, which has a great negative impact on Tesla. With you here, how can I pretend in the future?
  Although Tesla still needs BYD to supply batteries for it, but one size is equal to one size, and customers only remember the first in their hearts, not the second. To truly become the representative of the category and seize the high ground of users’ minds, Tesla must Re-surpass BYD in various data.
  The second is to cater to industrial opportunities and match production capacity expansion.
  In the past two years, Tesla has expanded its production globally, adding factories in Shanghai, Europe, and the United States. Musk and Tesla Chairman Robin Denholm both said that Tesla’s most important task is to continuously improve Output, by 2030, at least 20 million vehicles will be produced each year, which is a goal that Toyota, the leader of traditional car companies, has not achieved.
  To achieve such ambitions, Tesla must match the demand behind the huge production volume, be able to make the market run, and make Tesla’s flywheel turn faster and faster.
  Therefore, after Tesla’s production capacity reaches a certain level, it will continue to pull down the price to help itself achieve a balance between sales and products. The price occupies the largest market share.
  Especially in China, where the penetration rate of new energy vehicles has just reached 28%, the industry is in an explosive period. Who wouldn’t want to take advantage of this dividend?
  Of course, the same is true for other countries. Therefore, a brutal price war came, and Tesla cut prices in advance, and began to play cards clearly. For BYD, the fight is for the first place; for other domestic car companies, it may be the beginning of a life-and-death battle.
  Who do you like?

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