Tesla Orders in China
After Tesla recently announced price cuts in China, and following the economic scale of supply and demand, Tesla China is getting 10,000 additional orders per day, mostly for its Model Y SUV. With an average 10% price drop, it's no surprise that this is happening.
Some have wondered if this will hurt Tesla's margin. That depends on if you believe what Tesla has said about the reason for the price cuts. If you believe Tesla China saying that the price cuts are due to an easing of supply chain issues and uncertainty around material costs and that the price drop is in line with future costs, then margins should not be hurt.
If you believe that the price cuts are being done due to lack of demand, and there hasn't been a drop in material costs or there hasn't been efficiency and cost cutting measures done by Tesla at Giga Shanghai - then it is possible Tesla's margins will decrease even with the orders increasing.
Keep in mind that this is an additional 10,000 orders per day on top of the already strong order set that Tesla has. Wait times are increasing for the Model Y to 2 to 5 weeks from 1 to 4 weeks as a result of the price drops.
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Will the Orders Keep Coming?
Tesla's goal has never been to raise prices and make their cars as expensive as possible. It is to transition the world to sustainable Energy. Tesla's strategy will be to sell cars even at a loss if they had to in order to get more EVs on the road.
The second part of Tesla's plan is to make every Tesla vehicle equipped with the software and hardware necessary to enable FSD to drive it anywhere. Eventually, when Tesla is out of beta for FSD, there could be 10's of millions of Tesla's on the roads, ready to be activated.
The reports of these orders are from Chinese news outlets - Tesla China hasn't commented directly on the orders. This certainly seems like a price war is beginning with BYD also selling a vehicle comparable to the Model 3 in the new price range of the low $30,000 range.
I think the orders will keep coming and Tesla will also drop prices as much as makes sense based on demand and supply chain costs. We'll see for sure when Q1, 2023 earnings come out with the number of orders from China and gross margins for Tesla's vehicles.
What do you think of the new orders coming in from China? Do you believe that Chinese news outlets are reporting on this correctly?
In Related News: Tesla FSD Finishes 2022 With 285K Users
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.