Today Tesla's official website in China announced a significant price reduction for Tesla models in China, with the Model 3 starting at 229,900 RMB ($33,415) and the Model Y starting at 259,900 RMB ($37,775).
The price is at an all-time low.
In addition, Tesla announced the pricing of the new Model S and Model X in China: Model S Dual Motor All-Wheel Drive version for RMB 789,900 ($114,809), Model S Plaid Three Motor All-Wheel Drive version for RMB 1,009,900 ($146,700), Model X Dual Motor All-Wheel Drive version for RMB 879,900 ($127,890) The Yoke steering wheel and standard steering wheel are available as a free option for customers. Deliveries of these models will begin in mainland China in the first half of 2023.
In a little over two months, Tesla has lowered its prices three times. on October 24, Tesla lowered the prices of Model 3 and Model Y by RMB 14,000 to RMB 37,000 ($2041-$5395), with the adjusted starting price of Model 3 at RMB 265,900 ($38,772) and Model Y at RMB 288,900 ($42,125). On Nov. 8, Tesla disguised the price cut by way of insurance reductions to the tune of RMB 8,000 ($1166).
In the U.S. market, Tesla also reduced prices twice in 2022, by $3,750 and $7,500, respectively.
Tesla appears to have ample room to determine prices based on the cumulative volume of future orders. Tesla is currently one of the most profitable automakers in the world. with $3.29 billion in net profit in the third quarter of 2022, Tesla surpassed Toyota's $3.15 billion. On a three-quarter basis, Tesla's average net profit per vehicle was $9,570, about eight times that of Toyota. The extremely strong profitability provides the bottom line for Tesla's price cuts.
However, with Tesla's frequent price cuts, there are increasing questions about its market demand. in the third quarter of 2022, Tesla produced a total of 365,900 cars, 22,000 above deliveries, a situation that is not common in Tesla's past years. Some voices question this as a sign of weak demand in Tesla's market.
Tesla's production was again higher than deliveries in the fourth quarter. During that quarter Tesla produced 439,700 cars and delivered 405,300, with the difference between the two widening from 22,000 to 34,400.
In response, Tesla gave similar reasons as it did during the third quarter. Martin Viecha, Tesla's head of investor relations, said on Twitter that the gap between deliveries and production was due to a smoother delivery pattern that would generate more vehicles in transit.
~440k cars made and ~405k delivered in Q4. Delivery growth of 40% and production growth of 47% in 2022. All things considered...I’m super proud of the team for this result. A smoother delivery pattern will require more vehicles in transit, which is why production > deliveries.— Martin Viecha (@MartinViecha) January 2, 2023
In 2022 Tesla produced a total of 1,369,600 vehicles and delivered 1,139,900 units up 40% year-on-year, falling short of its goal of 50% growth. In the capital markets, Tesla's stock price has fallen 68.91% in the last year.
While prices continue to be cut to stimulate sales, Tesla's production pace is being adjusted in order to cope with inventory. at the end of 2022, Tesla's Shanghai plant had suspended production of cars for a week, and this short shutdown will continue into the New Year.