Analysis-Tesla raises electric car prices in the US; Reuters maintains consistency in China

Authors: Eva Mathews, Nivedita Balu and Hyunjoo Jin

(Reuters)-Tesla (NASDAQ:) this week showed signs of different strategies in the world’s two major auto markets, increasing prices to increase profit margins in the United States, while maintaining price stability in China and hopes Increase sales there.

According to data tracked by Reuters, Tesla increased the prices of the most affordable Model 3 and Model Y versions in the United States about a dozen times this year. At the same time, Tesla recently launched an affordable Model Y version in China, and did not cut the price.

Tesla announced record car deliveries in the second quarter, and price increases in North America pushed quarterly profits to a record high.

But in China, the world’s largest electric vehicle (EV) market, Tesla faces fierce competition from local competitors, product recalls, high-profile consumer protests, and pressure from regulators.

Bernstein analyst Toni Sacconaghi said that the launch of a lower-priced Model Y in China “may make it difficult for Tesla to continue to increase profit margins” and has triggered a “healthy state of demand in China”. “Questions.

A study by Bernstein analysts found that compared with car owners in the United States and Europe, Tesla owners in China are less enthusiastic and willing to buy back.

Tesla increased the price of Model Y Long Range at least six times in the United States this year, rising by $5,500 to $53,990. In China, the world’s most valuable automaker only raised the prices of Model Y SUVs and Model 3 sedans this year.

The list price of Model Y is RMB 276,000 (US$42,393.71). The company has also launched promotional activities in China, such as loan discounts.

Roth Capital Partners analyst Craig Owen said: “I think Tesla wants to be as competitive as possible in China. Lowering prices will become part of a positive market positioning.” “Battery prices in the United States and China and local car manufacturing costs exist. Huge difference.”

Tesla started production at its Shanghai plant at the end of 2019. It has increased the purchase of cheaper local components, including batteries from China’s CATL and LG China factories.

“Not long ago, the group also lowered prices in the U.S. to expand scale and maximize profitability. It feels like we are seeing this in China now,” Hargreaves Lansdown (LON:) analyst Nicholas Hyett said.

Gene Munster of Loup Ventures said that the low cost of producing local electric cars in China will have a lasting impact on Tesla.

“Tesla’s average cost is three times that of a typical electric car made in China. Therefore, their price must be lower than that of the United States to compete,” Munster said. “In the next ten years, Tesla’s price in China will be lower than in other parts of the world.”

Tesla also cut costs and increased profit margins in the US market by eliminating parts such as radar sensors and lumbar supports.

China’s market share declines

According to GLJ’s research, in China, Tesla’s share of the battery electric vehicle market (excluding plug-in hybrid vehicles) in the second quarter fell from 18% a year ago to 11%.But the data comes from Morgan Stanley (NYSE:) shows that as of February, Tesla still accounted for nearly 70% of the US battery electric market, although this proportion was lower than 81% a year ago.

China accounts for 44% of the global electric vehicle market, which is much higher than the 17% of the United States.

In China, Tesla faces competition from electric vehicle manufacturers such as Weilai (NYSE:) Inc and Xpeng Inc. (Xpeng Inc.). In the United States, Tesla’s brand is stronger. Its main competitors are traditional automakers such as Ford and General Motors (NYSE:), which generate only a small part of their sales from electric vehicles.

Global chip shortage

Tesla CEO Elon Musk reiterated that the company’s mission is to make electric cars affordable and blame the increase in car prices on the shortage of chips and raw materials.

Musk said that Tesla is responding to the chip shortage by using alternative chips and rewriting software.

He is cautious about the prospect of chip shortages. “It looks like things are really getting better,” he said on the second-quarter earnings conference call, but added: “It’s hard to predict.”

($1 = 6.5104 renminbi)

(Chart: Price of Tesla models in China: https://graphics.reuters.com/TESLA-PRICES/lgpdwmoaavo/chart.png)

(Chart: Price of Tesla models in the US: https://graphics.reuters.com/TESLA-PRICES/xmvjognedpr/chart.png)