Analysis: Tesla raises electric car prices in the United States. Holds a line in China

July 28 (Reuters) – Tesla Inc. (TSLA.O) has shown signs of various strategies in two of the world’s largest automotive markets, raising prices in China and raising prices to boost profits in the United States, hoping to boost sales there.

Tesla has raised prices for the Model 3 and Model versions more than a dozen in the United States this year, according to Reuters. At the same time, Tesla recently introduced an affordable version of the Model Y in China without controlling inflation. Read more

Tesla posted record-breaking vehicle supplies in the second quarter, and inflation in North America raised its quarterly earnings record. Read more

But in China, the world’s largest electric car market, Tesla faces competition from local competitors and product memories, strong consumer opposition, and pressure from regulators.

The introduction of low-cost Model Y in China, by Burnstein analyst Tony Sakonagi, makes it difficult for Tesla to make sustainable margins and raises questions about the “health needs of China.”

A study by Bernstein analysts found that Tesla owners in China were more enthusiastic and less likely to buy than those in the United States and Europe.

Tesla has raised prices for the model Yu Long region at least six times in the United States this year, dropping from $ 5,500 to $ 53,990. The world’s most expensive car maker, the Y SUV, and the Model 3 sedan have increased in price only once this year.

The Model U version has a price tag of 276,000 yuan ($ 42,394). The company has launched promotional campaigns in China.

“I think Tesla wants to be as competitive in China as possible,” said Craig Irwin, an analyst at Rose Capital. Low prices are part of that aggressive market position. There are significant differences in battery prices in the United States and China, as well as local vehicle production costs.

Tesla started production at the Shanghai factory in At the end of 2019. It has intensified production of cheap local components, including batteries from Chinese manufacturers CATL (300750.SZ) and LG (051910.KS).

“Long ago, the group was lowering prices in the United States to increase its size and increase its profitability, and we now see what we are seeing in China,” said Nicholas Heath, analyst at Hargevs Lansd.

Low costs of producing local EVs in China will have a lasting effect on Tesla, says Jean-Munster, Lope Ventures.

“The Tesla is on average 3x more expensive than the standard EV made in China, so it must be cheaper than the United States to compete,” Munster said. Tesla prices in China will be lower than in the next decade.

Tesla has raised costs in the US market by removing parts such as radar sensors and backrests. Read more

Tesla shares closed 0.3% on Wednesday after falling last session.

Chinese Market Sharing Slides

Tesla’s share of the Chinese electric car market fell to 11% in the second quarter a year ago, according to GLJ research. But data from Morgan Stanley shows that Tesla still had a 70 percent share of the US battery market in February, although it fell 81% a year ago.

China accounts for 44% of the global EV market, accounting for 17% of the US.

In China, Tesla will face competition from electric car manufacturers such as NIO.N and Xpeng Inc (9868.HK). In the United States, Tesla’s strongest competitors are older cars such as Ford (FN) and General Motors (GMN), which generate only part of their sales from EVs.

International Chip Short

Tesla CEO Elon Musk reiterated that the company’s mission is to make electric cars more affordable and that the increase in vehicle prices is due to a shortage of chips and raw materials.

Tesla said it is coping with the shortage of chips by using alternative chips and rewriting software.

He gave a cautious view of the shortage of chips. “It looks like it’s improving,” he said in his second quarter earnings call, but it’s “hard to predict.”

Reuters image
Reuters image

($ 1 = 6.5104 Chinese yuan renminbi)

Hyunjo Jean report in Eva Matthews, Subrat Patnaik and Nivedita Balu in Bengaldu and Berkeley, California; Correction by Peter Henderson, David Gregory, Gary Doyle, and Lisa Sugar

Our Standards – Thomson Reuters Principles.

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