The e-vehicle market is expanding at an exponential rate. New players are delving into this market which is experiencing major shifts. Tesla is without a doubt the industry leader considering its annual financial statements. Recently, the automaker announced price cuts for their market in China, something that shook the stakeholders in the industry. Â
After the automaker reduced prices throughout its spectrum in China, a country where economic and competitive pressures are escalating, Tesla Inc. shares dropped to their lowest level since June of last year. The drop in stock is something the industry anticipated following the decision by Tesla to reduce its prices in one of the biggest e-vehicle markets in the world.
Price reduction
The lowest locally produced Model 3 vehicle now goes for 265,900 yuan which is about $36,774. The Model Y SUV’s beginning price was reduced by the manufacturer by about 9% to a price of 288,900 yuan. And the trend has been witnessed all over the China market. Tesla’s price reductions are a reflection of how difficult it is for foreign automakers to compete with domestic automakers. It requires effective measures for a foreign automaker to compete with a domestic one. Domestic automakers sold approximately 80% of all-electric vehicles during the initial 7 months.
Elon Musk, the CEO, also mentioned some time back that the slowdown in the Chinese real estate market and the energy crisis in Europe have made it a little difficult to find customers. Elon Musk gave this response when trying to explain the sink in their stock following their decision to cut prices in China. While some commodities’ prices have decreased, Musk claimed that other EV inputs, such as Lithium battery-grade, are still extremely expensive.
Logistics
The price reductions partially undo multiple rounds of price increases made by Tesla at the beginning of the year after Elon Musk raised the issue of growing logistical and raw material costs. The business is now trying to boost sales where it gets about a 1/4 of its revenue but where it did not meet forecasts in the previous quarter. Tesla’s results may not live up to expectations this year because of the intense competition in the EV market. As a result, it chose to directly compete with its rivals by lowering prices in order to increase sales.
Following an increase in production capacity at the Shanghai factory, Tesla manufactured and sold a record-breaking 83,135 vehicles in China. This includes 5,522 vehicles that were exported. A million cars can now be produced at the site annually. The carmaker has always priced its vehicles based on costs, and that greater use of the company’s factory in Shanghai and supply chain’s relative stability. There is still a lot more to expect from this market and especially from the industry leader Tesla.Â
