Tesla initiated a price war in the Chinese market this year, forcing local manufacturers to confront the challenge. However, after nearly a year of intense competition, Tesla unexpectedly called a truce, while Chinese manufacturers led by BYD thrived in the fierce price war, turning adversity into opportunity.
According to a tally by Tencent News-affiliated media “Deep Web,” in the first two days of November, three Chinese automakers have already announced price reduction and promotion policies: BYD offers discounts ranging from CNY 5,000 to RMD 18,000 on five models; Leapmotor provides a maximum discount of CNY 10,000 across all models; Lynk & Co, under the Geely umbrella, offers a subsidy of CNY 6,000 for its Lynk 08 model. Since October, more than 10 car manufacturers have implemented price reduction and promotion policies.
Tesla Bucks the Trend with Price Increase
While several Chinese car manufacturers are engaging in a price war, Tesla is moving against the current by increasing prices. On November 9th, Tesla officially announced a price hike for the Model 3 Long Range version by CNY 1,500, bringing the total price to CNY 297,400. The Model Y Long Range version also saw a price increase of CNY 2,500, bringing the total to CNY 302,400.
This marks Tesla’s second price hike in nearly a month. On October 27th, Tesla China raised the price of the Model Y Performance version by CNY 14,000, resulting in an adjusted selling price of CNY 363,900. Additionally, the North American Tesla Model Y Long Range version also experienced a price increase of USD 500.
The report further indicated the industry analysis, suggesting that the previous round of price increases has already eroded Tesla’s profitability. Tesla’s third-quarter financial report, released in mid-October, revealed earnings and delivery volumes below Wall Street expectations. The gross profit margin was particularly impacted by the price war, reaching a four-year low of 17.9%.
BYD Secures Sales Crown in Chinese Car Price War
In contrast to Tesla’s unexpected withdrawal from the recent price war, Chinese manufacturers are not only surviving but maintaining their ability to continue the battle. BYD, sitting comfortably as the global leader in new energy vehicle sales, reported a third-quarter net profit of CNY 11.54 billion.
Meanwhile, AITO revived its fortunes with the new M7 model, and XPeng Motors successfully returning to growth in sales.
Data indicates that BYD emerged as the winner in the first half of the price war, maintaining the top position in sales. Despite a decrease in unit revenue amid the price war, quarterly net profit per unit increased. In contrast, Tesla’s per-unit net profit has declined each quarter this year, reaching a global per-unit net profit of only CNY 31,300.
The overall gross profit margin trend and per-unit net profit trend of BYD and Tesla align. In the third quarter of this year, BYD achieved a historic high gross profit margin of 22.1%, while Tesla’s gross profit margin hit a near three-year low at 17.89%.
However, the price war is inevitably taking a toll on the industry, with multiple research institutions and investment banks predicting an increase in mergers and acquisitions, as well as bankruptcy reorganizations among Chinese new energy vehicle manufacturers in the future.
