After three consecutive months of price cuts, Tesla has announced a price increase. Unlike the previous sudden price adjustments, this time Tesla has adopted a strategy of giving advance notice of the price increase.
On March 20, it was learned from inside sources at Tesla China that the official price of the Model Y will increase by 5000 RMB on April 1. At the same time, the current 8000 RMB official on-hand car insurance subsidy and the maximum 10000 RMB paint exemption policy will also expire on March 31. After this price adjustment, the actual price increase for the Model Y will be up to 23,000 RMB.
Tesla has announced price increases for the Model Y in the North American market and in some European countries, with increases of $1000 and €2000 respectively. Many are now discussing when Tesla China will announce price increases. The current round of price increases in the Chinese market is significantly lower than in the European and American markets, thanks to the continued upgrading of production efficiency and automation levels at the Tesla Shanghai Gigafactory, as well as cost reductions from local Chinese component manufacturers. However, in the face of the intensifying “price war” in the domestic car market, Tesla has “raised prices in the opposite direction,” leaving many netizens expressing their confusion. Since BYD launched the Dragon Year car price war in mid-February with the Qin Plus Honor Edition, over twenty brands, including BYD, Geely, NIO, XPeng, NIO, Lantu, Changan, and Beijing Hyundai, have made price adjustments to varying degrees, with dozens of models including both fuel and new energy vehicles, and the highest price reduction reaching up to 65,000 yuan (9030$). In response to Tesla’s announced price increase, some car company officials were asked if they would follow suit, to which they replied, “We have not received any news at the moment.” Opinions on Tesla’s price increase vary among netizens. Some believe that “Tesla’s counter-cyclical price increase will lead to a decline in sales compared to other brands,” while others believe that “Tesla is just playing with traffic and exposure.” Some also believe that Tesla’s advance notice of the price increase ten days in advance is actually a “pressure tactic.” Unlike the “sudden attack” in previous price adjustments, this round of price increases by Tesla in China was announced in advance, possibly to give consumers time to act. After the price increase announcement, some Tesla salespeople did indeed post relevant information on social media, reminding customers that all current car activities will end on March 31st this year. Some netizens also reported that Tesla salespeople had sent them private messages saying that prices were going to increase and advising them to place their orders early.
From a global perspective, the root cause of Tesla’s price increase may still be the pressure it faces in stock prices and profits. Recently, Tesla’s stock price has been under pressure, and according to financial report data, in the fourth quarter of last year, Tesla’s gross margin fell to 17.6%, the lowest level since 2019. Looking at the full year of 2023, Tesla’s gross margin has fallen significantly to 18.2%, a decrease of 7.35 percentage points from 25.55% in 2022. In the view of institutions such as Goldman Sachs, facing intensified competition and slowing delivery volume, Tesla’s continuous price reduction in 2023 has already damaged the company’s profitability. The delay of products and features such as FSD and the third-generation platform, although Tesla still has long-term growth potential, it faces significant short-term risks.