Demand Hell: Tesla Cuts Prices In China For The Seventh Time This Year

Demand Hell: Tesla Cuts Prices In China For The Seventh Time This Year

Tyler Durden

Tue, 10/13/2020 – 14:45

Tesla has once again cut prices for cars in China. This time, the company slashed prices for its longer-range and performance Model S by 23,000 yuan for each model, according to Bloomberg. Including today’s cuts, it is the seventh price cut for Tesla in China alone this year, according to GLJ Research’s Gordon Johnson.

Perhaps the company’s newly released September sales numbers in China were the driving force behind the cuts. As Johnson notes in his latest report on the company from Tuesday, October 13, Tesla actually lost market share in China and unsold inventory doubled. Johnson writes: 

TSLA sold 11,329 made in China (“MIC”) Model 3 cars in Sep. 2020, bringing quarterly totals to 34,333. This compares to 30,494 in 2Q20, a growth of +12.6%, while production grew 13.2%, and unsold inventory roughly doubled q/q (i.e., up +75.5% q/q). Interestingly, while the Chinese NEV market grew 26% m/m in Sep. 2020 (link), TSLA’s MIC M3 sales were down -2% over the same time frame (TSLA’s Model 3 MIC market share fell from 10.5% in Aug. to 8.3% in Sep.).

As Johnson notes, the company did stop production the last 10 days of September in China, but still saw its inventory nearly double. Johnson says this could be why the company plans on exporting cars it has made in China to the Asia Pacific and Europe. 

Johnson also noted that Tesla (purple line) is losing market share in the EU:

Meanwhile as Tesla looks to stoke demand in Asia, and while the market continues to ascribe a valuation to Tesla as though it is not a traditional auto manufacturer, people can’t help pointing out the obvious: that they are still behind legacy automakers like GM. For example, GM has sold more than 2x the amount of EVs in China than Tesla did last month:

Johnson concluded, stating about the price cuts: “That’s quite a few price cuts for a company that is said to be supply constrained (by definition, if you continuously have to lower the price of the item you’re selling, and have failed to sell out production for three straight months and running, you have a demand problem… not a supply problem).”

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Author: Tyler Durden

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