Tesla has hiked prices of their most affordable electric cars, the Model 3 and the Model Y, close to a dozen times in the United States. The company has shown a few signs of having conflicting strategies in the two biggest automobile markets in the world. The company has increased its prices in the United States to increase its profit margin; however, its prices in China have not been hiked. By keeping the prices low, the company is planning to expand its business in China.
Tesla has very recently launched its affordable Model Y in China, where there are no reports of hiked prices. The company has posted the record of the deliveries of the vehicles in the second quarter, and the increased prices in North America have just increased the profit of the company.
China is the world’s biggest market for Electric Vehicles, and the company faces some serious competition from rival companies in the country. Due to this competition, there are numerous product recalls, pressure from regulators, and some big-time protests by the consumers. Toni Sacconaghi has mentioned that introducing the Model Y at a lower price in the Chinese market might make the company’s continued development a bit difficult.
Tesla has hiked the prices of its cars in North America to increase the profit margin.
Tesla has increased the Model Y Long Range prices by six times in the US this year. The price has been increased by 5,500 US dollars (which is close to Rs. 4.09 lakhs) and has reached around 53,990 US dollars (which is around Rs. 40.16 lakhs). However, if we look at the price increase in China, then the company has just increased the price of the cars only once this year. In China, the Model Y is priced at CNY 276,000 (which is around Rs. 31.58 lakhs). Apart from putting up a competitive price, the company has started many promotional campaigns like loan offers in the country.
The company has started manufacturing in the factories that they have set up in Shanghai from the latter half of 2019. It has been using local components, which make the end product a bit cheaper. These local components would include the batteries from CATL and LG in China.
Elon Musk, the CEO of Tesla, has always reemphasized that the company’s primary mission is to make electric cars affordable to the people. He has always blamed the rising prices of vehicles because of the shortage of raw materials for making chips. The company is coping up with the present situation of chip shortage by making use of alternative chips and reworking the entire software.
Details on Tesla’s market in China
The shares of Tesla have dropped to 11 percent in the market of Electric Vehicles. In the previous year, the stakes were at 18 percent, as mentioned by GLJ research. The companies from which Tesla is facing competition in China are Xpeng and Nio. In the United States, the company has a stronghold and an upper hand over many companies. However, it still faces some good competition from rivals like General Motors and Ford. These companies generate only a small part of their sales from the market of Electric Vehicles.