Shulou(Shulou.com)11/24 Report--

January 20 news, Tesla sales of electric vehicles to earn profits more than almost all competitors in the world. Now, CEO Elon Musk is using this superior profitability as a secret weapon in launching the price war on electric vehicles.

A Reuters analysis of industry data shows Tesla was once one of the biggest losers in the auto industry, but in the past year, the company has made more profits from selling electric vehicles than most of its major competitors. In the third quarter of 2022, Tesla made a gross profit of $15653 per vehicle sold, more than twice that of Volkswagen, four times that of Toyota and five times that of Ford, according to the data.

For most of last year, Tesla raised the price of its most popular electric models several times, such as the Model Y SUV. Shortage of semiconductors and other materials has stifled production in the auto industry, forcing the industry to focus on developing higher-margin models and making more money at a time when sales are down.

In this case, Tesla decided to change strategy and use its production cost advantage to support price cuts, which poses a challenge to established automakers such as General Motors. Since the 2008 financial crisis, these established car companies have pursued a strategy of "profits above production" and doubled their bets during the epidemic.

To control production costs, Tesla invested heavily in new manufacturing techniques, such as replacing small metal parts with large castings. Tesla has also brought parts of its battery manufacturing and supply chain in-house and standardized vehicle designs to improve economies of scale.

Making use of production cost advantages to support price reduction strategies has a long history in the automotive industry. In the early 1900s, Henry Ford slashed the price of the Model T as new production systems accelerated.

In the 1980s and 1990s, Toyota used the cost lead provided by its lean manufacturing system to sell cars at prices that Detroit automakers could hardly match. Now Toyota is reformulating its strategy under pressure from Tesla.

In 2022, demand for electric vehicles will grow faster than the overall market in the United States and globally, encouraging automakers to push up the price of electric vehicles. Ford raised the price of its electric F-150 pickup truck by 40% during 2022.

But analysts warn that capacity in the global electric vehicle market could soon exceed demand. Warren Browne, an industry forecaster, says demand for electric vehicles in North America will reach a level of about 2.8 million vehicles a year by 2026. But he said North American electric vehicle factories would be able to assemble more than 4.5 million vehicles by then, leaving overall capacity utilization at less than 60 percent.

In China, the world's largest electric vehicle market, the government's end of subsidies has prompted industry rivals to re-compete for market share. "In China, Tesla has used nuclear weapons to drive weaker, lower-margin players out of the market," said an analyst at Automobility, an industry consultancy based in Shanghai. Cut the pie down and the remaining businesses can eat more. "

Electric car start-ups like Xiaopeng have begun to benefit from Tesla's price increases. Now, Xiaopeng is lowering prices in China, but its financial leeway is much smaller than Tesla's.

Xiaopeng reported a gross profit of $4565 per vehicle for the third quarter and a net loss of $11735 per vehicle, according to company data analyzed by Reuters. "We hope that after helping cars become more affordable, more people can use smart cars," the company said in a statement. "

Vietnamese electric car startup Vinfast said Thursday it will use price promotions to counter Tesla.

BYD, the homegrown market leader in electric vehicles, announced price increases starting Jan. 1 after China phased out subsidies for electric vehicles. So far, BYD has not responded to Tesla's latest price cut in China. BYD's gross profit per vehicle, however, can reach $5456, giving it more leeway in price wars than Volkswagen, Toyota or GM.

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