Aerial view of the Tesla Shanghai Gigafactory in Shanghai, China on March 29, 2021.
Chu Xiaolu | Getty Images News | Getty Images
From shaking hands with Chinese officials Visits to major ministries and agencies in ChinaElon Musk’s visit to Beijing has drawn attention to China’s position in the global electric vehicle market.
Anthony Sashin, senior investment strategist at investment manager ClanShares, said the Tesla CEO’s visit to China was “very important” to him.
China accounts for 50% of Tesla’s car sales and 20% of its production capacity, and this visit “will set the tone straight, to make sure Tesla has the same perception. ” [Chinese Communist Party]’” Sashin told CNBC.road sign asia. ”
At Tesla’s April earnings call, Musk said U.S.-China tensions were a risk to the company’s 2023 outlook.
politics and macroeconomics
Sashin said the visit could also be seen as a “political statement” to China, with business leaders such as Musk and JP Morgan Chief Executive Jamie Dimon “politicians on both sides of the Pacific We are telling them that business needs political stability,” he said.
Politics is not the only reason. Saxin said the macro environment for EVs in China was “challenging,” highlighting the end of China’s subsidies for new EV purchases and rising U.S. interest rates.
Faced with this situation, companies are cutting prices to boost sales, which hurts profits, he said.
price competition
Tesla cuts EV prices in China October and January last year, but after that Prices will be raised again in May. Still, after several rounds of price cuts around the world, Tesla cars are still cheaper than they were in early 2023.
Bill Russo, founder and CEO of strategy and investment advisory firm AutoMobility, said the fact that Tesla was forced to cut prices in the first place highlights how important the Chinese market is to U.S. electric car makers. said that it shows
“This shows how important it is to protect the Chinese market and how important it is to the global system. We need China’s scale,” he said on CNBC’s “Squawk Box Asia.” .
Russo said Tesla needs the economies of scale China offers to maintain its cost advantage globally, adding: “But to maintain that, we need to make sure we maintain relevance here. there is,” he said.
But it won’t be easy for Tesla. He said China is the most competitive market for EVs, with Tesla competing with several local companies for dominance. “Unlike the rest of the world, Tesla is not the only top player in this market,” he added.
Asked whether Tesla’s price-cutting strategy was appropriate, Mr. Russo said Tesla was “fighting an old portfolio,” with the Model 3 launched three years ago and the Model Y two years ago.
To compete with Chinese EV companies launching new models and aging product portfolios, it had to compete on price.
Russo said Chinese EV makers BYD Selling a hybrid with a long cruising range. This is a “weapon that Tesla doesn’t have,” he said, adding that BYD also beats Tesla two to one in the pure battery electricity business.
So, unlike other parts of the world that face less intense competition, Tesla will have to rely on pricing to stay competitive.
“The problem is that Tesla is the ‘premium EV’ icon everywhere in the world, but to compete here in China, it has to compete on price,” he said.
“Usually price wars are won by companies that outprice, but Tesla is not the cheapest competitor in the market at the moment.”
