Our reporters Ni Hao, Li Xiaoxiao, and Song Yi are present
In the world’s most competitive new energy vehicle market, the American electric vehicle giant Tesla suddenly played the “price card”. On the 24th, Tesla announced that its two models had reduced prices in the Chinese market, causing market shocks. According to the Wall Street Journal of the United States on the 25th, Tesla CEO Musk said a few days ago that most material costs are declining, and competition from local competitors is becoming increasingly fierce. The US news website “Market Watch” said on the 24th that Morgan Stanley has lowered Tesla’s target stock price. Data from the first three quarters of this year shows that Tesla ranks third in China’s new energy vehicle market after two Chinese car companies.
There is a lot of downward pressure on stock prices
According to the Wall Street Journal, the prices of Tesla Model Y and Model 3 models in China were cut by 9.4%, and the adjusted starting prices were 288,900 yuan and 265,900 yuan respectively. Affected by the sharp rise in the price of lithium materials, Tesla has increased prices many times in the past period. The price reduction brings the price range of these models back to levels close to those of early March. Tesla’s public documents on the 24th show that the company’s total revenue in the third quarter was $21.454 billion, a year-on-year increase of 56%. Among them, the revenue of the US market was 10.236 billion US dollars, a year-on-year increase of 59%; Revenue in the Chinese market was US$5.131 billion, a year-on-year increase of 64.8%. In the first nine months of this year, Tesla’s revenue in the Chinese market was $13.568 billion, a year-on-year increase of 50.5%, and China is still Tesla’s second largest market.
China is the world’s largest electric vehicle market and the most competitive battlefield for the world’s major electric vehicle brands. The New York Times said that Tesla lowered its sales price in China, highlighting the intensification of competition in the Chinese market. In China, Tesla faces competition from domestic companies such as BYD, SAIC and NIO.
Reuters said that according to estimates by the China Association of Automobile Manufacturers, China’s electric vehicle sales will increase by about 56% this year to 5.5 million, far exceeding the overall car sales of most countries. In the first nine months of this year, Tesla sold more than 318,000 electric vehicles in China. During the same period, BYD’s total sales of pure electric vehicles and hybrid plug-in vehicles reached 1.2 million units, an increase of 250%.
The New York Times said that Tesla’s previously released third-quarter profit data disappointed Wall Street, although third-quarter profit doubled from the same period last year, but fell short of investors’ expectations. As of the close of the 24th, Tesla’s stock price fell 1.49%, closing near $211. Since the beginning of this year, Tesla’s stock price has fallen by more than 45%. Tesla’s price cuts in the Chinese market have heightened investor concerns that the company’s profitability and dominance in the electric vehicle market are threatened by slowing economic growth and increased competition.
Market Watch said Wall Street investment bank Morgan Stanley lowered Tesla’s share price target to $330 from $350, and analyst Jonas said that while many of his customers believe that “Tesla has a unique position in the electric vehicle market” and “products are generally in short supply” and the company is less likely to be affected by a slowdown in consumer spending, Jonas “fundamentally” disagrees. He analyzed that Tesla is getting bigger and more vulnerable to consumer purchasing power and electric vehicle affordability, and the company’s recent price cuts in the Chinese market have affected the already fragile market sentiment, and he remains cautiously optimistic about the future performance.
China’s opponents are gaining momentum
For Tesla’s operating income in the third quarter of 2022 slightly lower than expected, industry analysts believe that considering the increase in the speed of order digestion by the expansion of the Shanghai factory and the imminent withdrawal of domestic new energy vehicle subsidies, Tesla China lowered its price this time, hoping to stimulate terminal sales to sprint the overall delivery performance in the fourth quarter.
Tesla’s main future challenge comes from the rising Chinese electric car brand. After 10 years of development, China’s new energy vehicle companies have come to the forefront of the world. In the first half of this year, BYD sold 641,000 new energy vehicles worldwide, a year-on-year increase of more than 300%, surpassing Tesla’s half-year sales of 564,000 units, becoming the champion of the global new energy vehicle market. In the process of rapid development of China’s new energy vehicles, new forces such as NIO, Xpeng and Li have also continued to grow, with monthly sales exceeding 10,000 units, ranking in the forefront of the domestic new energy market.
The rapid development of the new energy vehicle industry has become a new driving force for China’s industrial production to pick up rapidly in the third quarter of 2022. According to data from the China Association of Automobile Manufacturers, in the first nine months of 2022, the cumulative sales of new energy vehicles in China reached 4.567 million units, a year-on-year increase of 1.1 times, and the market share jumped to 23.5%, close to completing the 2025 new energy vehicle industry development plan proposed by the State Council. Data show that as a whole, the industrial added value of the automobile manufacturing industry in the first 8 months of 2022 increased by 4.5% year-on-year, leading the recovery of national industrial production.
In the Chinese market, BYD continued its strength in the first half of the year. In the first three quarters of this year, BYD’s cumulative sales of new energy vehicles were 1.1529 million units, greatly surpassing Tesla. In second place is SAIC-GM-Wuling, which sold a total of 325,000 new energy vehicles in the first three quarters, the biggest contributor of which is the Wuling Hongguang MINIEV, known as the “national god car”. Tesla, which ranked third, sold a total of 318,200 units, while Geely, GAC AION, Chery Automobile, Changan Automobile, and Nezha Automobile sold 205,300 units, 184,900 units, 179,900 units, 119,400 units, and 109,800 units, respectively, ranking fourth to eighth.
According to the latest data from the National Passenger Vehicle Market Information Association, China’s new energy vehicle sales reached 708,000 units in September this year, a year-on-year increase of 93.9%, and the market share reached 27.1%. The market penetration rate of new energy vehicles self-owned brands reached 55.2%, with a rapid growth rate. The penetration rate of new energy vehicles among mainstream joint venture brands is only 4%. Cui Dongshu, secretary general of the National Passenger Vehicle Market Information Association, said that the market share of independent brands continues to rise, a large part of which is due to the increase in new energy vehicles, and also reflects the rapid response and adjustment ability of independent brands in the face of market changes.
The future is more competitive
Yu Qingjiao, secretary general of the Zhongguancun New Battery Technology Innovation Alliance, said in an interview with the Global Times that Tesla’s price reduction in the Chinese market is mainly to promote sales and boost its declining stock price. Tesla, which was previously “sharp” in China, is now increasingly feeling the competitive pressure of domestic independent brands such as BYD. The fierce offensive of BYD and other companies has made foreign brands such as Tesla feel strong pressure.
Tesla’s capacity expansion is also limited by the supply of batteries, and China is the most complete manufacturing country in the power battery industry chain, so China’s domestic self-owned brand new energy vehicle companies have a competitive advantage in battery supply.
However, based on the importance of China’s new energy vehicle market, foreign brands such as Volkswagen and BMW have begun to invest heavily in the industrial chain in China. Yu Qingjiao said that foreign brands including Tesla attach great importance to the huge cake of the Chinese market and have increased their offensive efforts in China, which means that the competition in China’s new energy market will become more and more fierce, and foreign brands will become more and more threatening to domestic traditional automobile brands and new car manufacturing forces.
Yu Qingjiao said: “In China’s new energy market, only Tesla is currently competitive for foreign brands, and will maintain a leading position for a long time in the future; In terms of independent brands and joint venture brands, the performance of independent brands is obviously strong, which can be confirmed by the market penetration rate of new energy vehicles. He also said that among its own brands, BYD’s monthly sales have exceeded 200,000 units, and the monthly sales of Geely, GAC, SAIC, Changan, Great Wall, Chery, Nezha, Li, Zero, NIO and other emerging automakers have exceeded 10,000 units, with great potential for future growth. Among the joint venture brands, SAIC-GM-Wuling and FAW-Volkswagen performed relatively well. On the whole, the development of independent brands in the field of new energy will be faster.
At the same time, Chinese new energy vehicle companies are relying on their technical capabilities to cooperate with overseas traditional automobile enterprises to seize more market share. According to the Asahi Shimbun reported on the 24th, Toyota Motor released the BZ3, an electric vehicle jointly developed with BYD on the same day, and plans to sell it in China in the near future. Toyota is seeking to expand its share of electrified vehicles in China through a partnership with BYD, which is a leader in electrification technology.
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