• 21.07.2024

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    Tesla’s Stock Surges on New China Financing Policy: Impact on Market and Sales

    Jul 3, 2024

    Every journalist Dong Tianyi, every intern journalist Liu Xi, every editor Pei Jianru On Monday, Tesla’s stock price rose over 6% to close at $209.86, hitting a new high in nearly three months, with a market value soaring by $38.2 billion overnight to a total of $669.85 billion.

    Tesla's Stock Surges on New China Financing Policy: Impact on Market and Sales

    Some analysts believe that the surge in Tesla’s stock price may be related to its new car financing policy launched in China. According to a post on Tesla’s official Weibo account on July 1, the company will offer three benefits for consumers purchasing cars in July. The first is a maximum 5-year 0% interest and low-interest financing policy for the Model 3/Y Standard Range version, with a daily rate as low as 85 yuan (10$). The second is a maximum 5-year 0% interest and low-interest financing policy for the Model 3/Y Long Range All-Wheel Drive version, with a daily rate as low as 107 yuan (10$). Finally, the limited-time low-interest annual rate in July has been reduced to a minimum of 0.5%.

    Tesla's Stock Surges on New China Financing Policy: Impact on Market and Sales

    It is understood that in this promotion, a down payment of 79,900 yuan (10990$) can choose a 5-year interest-free plan. Specifically, for different models, the daily minimum for Model 3 rear-wheel drive version is 85 yuan (10$), and for the long-range all-wheel drive version is 107 yuan (10$); the daily minimum for Model Y rear-wheel drive version is as low as 95 yuan (10$), and for the long-range all-wheel drive version is as low as 118 yuan (20$). Compared with the previous standard annual interest rate of 2.5%, Model Y can save more than 26,000 yuan (3570$) in interest. The new car financing policy introduced by Tesla in China may be closely related to the current market pressure it is facing. With the fierce price war in the Chinese car market, Tesla’s sales in China have also fluctuated. Public data shows that in the first quarter of 2024, Tesla’s retail sales in the Chinese market were approximately 132,400 units, accounting for 30.57% of Tesla’s global market output, but a year-on-year decrease of 3.64%; data from the China Passenger Car Association shows that in the first five months of this year, Tesla’s sales in China dropped by 0.5%. The decline in sales has also had a significant impact on Tesla’s performance. According to official information, Tesla’s total revenue in the first quarter was $21.301 billion, a year-on-year decrease of 9%; net profit was $1.144 billion, a significant decrease compared to $2.539 billion in the same period last year; net profit attributable to common stockholders was $1.129 billion, a year-on-year decrease of 55%; and the operating profit margin also decreased from 11.4% in the same period last year to 5.5%. In order to alleviate operational pressure, there have been reports recently that due to poor energy density and charging performance and high costs, if cost reduction cannot achieve the expected results by the end of the year, Tesla will consider stopping the production of 4680 batteries at the GigaTexas factory in Texas and instead purchase them from external suppliers. In response to this, a reporter from “Daily Economic News” contacted Tesla China for verification, and they replied, “Tesla mentioned during the June shareholders’ meeting that the production of 4680 batteries is proceeding smoothly.”

    Tesla's Stock Surges on New China Financing Policy: Impact on Market and Sales

    In fact, as early as the beginning of this year, Tesla was involved in a price war. In January of this year, Tesla’s Model 3 Refresh and Model Y both saw price cuts. The Model 3 Refresh series saw a price drop, with the rear-wheel drive version dropping to 245,900 yuan (33810$) and the long-range version dropping to 285,900 yuan (39310$); the Model Y rear-wheel drive version dropped to 258,900 yuan (35600$), and the long-range version dropped to 299,900 yuan (41230$).

    Tesla's Stock Surges on New China Financing Policy: Impact on Market and Sales

    For this “5 years 0 interest” promotion launched by Tesla, instead of directly reducing prices, some believe it may signal a cooling in the car market “price war.” Data from the China Passenger Car Association shows that in May this year, only 10 models were reduced in price, a smaller scale compared to the same period in 2023. In contrast, in February this year, 29 models were reduced in price, in March 49 models, and in April a high of 54 models. Cui Dongshu, Secretary-General of the National Passenger Vehicle Market Information Joint Conference, believes that the low number of models reduced in price to 10 in May reflects a temporary end to the “price reduction wave.” With the significant reduction in models with price cuts in May, the market is gradually returning to the normalization of promotional incremental competition. After multiple rounds of price reduction promotions, Tesla’s sales have gradually rebounded. On the evening of July 2, the latest sales data released by the China Passenger Car Association showed that in June this year, over 71,000 vehicles were delivered from the Shanghai Gigafactory, with domestic sales of Tesla exceeding 59,000 vehicles, a 7% increase from the previous month. In the second quarter of this year, Tesla’s domestic sales increased by 10.2% compared to the previous quarter.