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Tesla Announces Unbeatable Profit Margins


Tesla made quite a surprising announcement in January this year, that it would be cutting prices on its vehicles by as much as 20%.

 

Even though price cuts are not new in the automotive world, they surely are for Tesla. The company, which generally has been unable to keep up with demand, has seen its order backlog shrink from 476,000 units in July 2022, to 74,000 in December 2022.

 

This has been attributed to robust production growth of Tesla, which saw 2022 production increase 41% over 2021 (from 930,422 to 1,313,851 units).

 

Apparently, the days of “endless” demand of Tesla are over, Tesla is going on the offensive by reducing its prices. This is a step that puts pressure on competitors, but has also annoyed existing owners of this brand.

 

Turning up the Heat

Cutting price of vehicles is Tesla’s attempt to protect its market share, but they are not exactly the desperation move some media outlets have claimed them to be.

 

Latest data compiled by Reuters shows that Tesla’s profit margins are considerably higher than those of its competitors, both in terms of gross and net profit. The infographic only illustrates the net figures, but gross profits are also included in the table below.

 

Company

Gross profit per car

Net profit per car

Tesla

$15,653

$9,574

GM

$3,818

$2,150

BYD

$5,456

$1,550

Toyota

$3,925

$1,197

VW

$6,034

$973

Hyundai

$5,362

$927

Ford

$3,115

-$762

Xpeng

$4,565

-$11,735

Nio

$8,036

-$19,141

 

Price cutting strategy has its shortcomings, but considering Tesla’s situation, the benefits are worth it based on the above data especially in a critical market like China.

 

Tesla has taken the nuclear option to bully the weaker, thin margin players off the table.

– BILL RUSSO, AUTOMOBILITY

 

In the case of Chinese EV startups Xpeng and Nio, net profits do not exist, which means it is not likely for them to be able to match Tesla’s reductions in price. Both firms have reported year-on-year sales drops in January.

 

As for Tesla, Chinese media outlets have claimed that the firm received 30,000 orders within three days of its price cut announcement. It is to note that this has not been officially confirmed by anyone within the company.


Tit for Tat

Recently Ford made headlines for announcing its own price cuts on the Mustang Mach-E electric SUV. This model is a direct competitor to Tesla’s best-selling Model Y.

 

Chevrolet and Hyundai have also made some adjustments in their EV prices in recent months, as listed in the table below.

 

Model

Old Price

New Price

Discount

Tesla Model Y Long Range

$65,990

$53,490

18.9%

Chevrolet Bolt EUV 2023

$33,500

$27,200

18.8%

Tesla Model Y Performance

$69,990

$56,990

18.6%

Chevrolet Bolt 2023

$31,600

$26,500

16.1%

Tesla Model 3 Performance

$62,990

$53,990

14.3%

Hyundai Kona Electric 2022

$37,390

$34,000

9.1%

Ford Mustang Mach-E GT Extended Range

$69,900

$64,000

8.4%

Tesla Model 3 Long Range

$46,990

$43,990

6.4%

Ford Mustang Mach-E Premium AWD

$57,675

$53,995

6.4%

Ford Mustang Mach-E RWD Standard Range

$46,900

$46,000

1.9%

 

A significant player missing from this table would be Volkswagen. The company has been gaining ground on Tesla, especially in the European market.

 

We have a clear pricing strategy and are focusing on reliability. We trust in the strength of our products and brands.

– OLIVER BLUME, CEO, VW GROUP

 

This verdict could obstruct Volkswagen’s goal of becoming a dominant player in EV market, especially if more automakers join Tesla in cutting prices. For now, Tesla still holds a strong grip on the U.S. market.

 

Thank You Elon Musk!

Recent buyers of Tesla became furious when the company announced it would be reducing prices on its cars. In China, buyers even staged protests at Tesla stores and delivery centers.

 

Recent buyers not only missed out on a better price, but their cars have effectively devalued by the amount of the cut. This is a bitter turn of events, given Musk’s 2019 claims that a Tesla would be a valuable asset.

 

I think the most profound thing is that if you buy a Tesla today, I believe you are buying an appreciating asset – not a depreciating asset.

– ELON MUSK, CEO, TESLA

 

These comments were made in reference to Tesla’s full self-driving (FSD) capabilities, which Elon claimed would enable owners to turn their cars into robotaxis.


Tesla Announces Unbeatable Profit Margins


Infographic by: visualcapitalist

Share This Infographic On Your Site

Tesla Announces Unbeatable Profit Margins #Infographic

 

Tesla Announces Unbeatable Profit Margins


Tesla made quite a surprising announcement in January this year, that it would be cutting prices on its vehicles by as much as 20%.

 

Even though price cuts are not new in the automotive world, they surely are for Tesla. The company, which generally has been unable to keep up with demand, has seen its order backlog shrink from 476,000 units in July 2022, to 74,000 in December 2022.

 

This has been attributed to robust production growth of Tesla, which saw 2022 production increase 41% over 2021 (from 930,422 to 1,313,851 units).

 

Apparently, the days of “endless” demand of Tesla are over, Tesla is going on the offensive by reducing its prices. This is a step that puts pressure on competitors, but has also annoyed existing owners of this brand.

 

Turning up the Heat

Cutting price of vehicles is Tesla’s attempt to protect its market share, but they are not exactly the desperation move some media outlets have claimed them to be.

 

Latest data compiled by Reuters shows that Tesla’s profit margins are considerably higher than those of its competitors, both in terms of gross and net profit. The infographic only illustrates the net figures, but gross profits are also included in the table below.

 

Company

Gross profit per car

Net profit per car

Tesla

$15,653

$9,574

GM

$3,818

$2,150

BYD

$5,456

$1,550

Toyota

$3,925

$1,197

VW

$6,034

$973

Hyundai

$5,362

$927

Ford

$3,115

-$762

Xpeng

$4,565

-$11,735

Nio

$8,036

-$19,141

 

Price cutting strategy has its shortcomings, but considering Tesla’s situation, the benefits are worth it based on the above data especially in a critical market like China.

 

Tesla has taken the nuclear option to bully the weaker, thin margin players off the table.

– BILL RUSSO, AUTOMOBILITY

 

In the case of Chinese EV startups Xpeng and Nio, net profits do not exist, which means it is not likely for them to be able to match Tesla’s reductions in price. Both firms have reported year-on-year sales drops in January.

 

As for Tesla, Chinese media outlets have claimed that the firm received 30,000 orders within three days of its price cut announcement. It is to note that this has not been officially confirmed by anyone within the company.


Tit for Tat

Recently Ford made headlines for announcing its own price cuts on the Mustang Mach-E electric SUV. This model is a direct competitor to Tesla’s best-selling Model Y.

 

Chevrolet and Hyundai have also made some adjustments in their EV prices in recent months, as listed in the table below.

 

Model

Old Price

New Price

Discount

Tesla Model Y Long Range

$65,990

$53,490

18.9%

Chevrolet Bolt EUV 2023

$33,500

$27,200

18.8%

Tesla Model Y Performance

$69,990

$56,990

18.6%

Chevrolet Bolt 2023

$31,600

$26,500

16.1%

Tesla Model 3 Performance

$62,990

$53,990

14.3%

Hyundai Kona Electric 2022

$37,390

$34,000

9.1%

Ford Mustang Mach-E GT Extended Range

$69,900

$64,000

8.4%

Tesla Model 3 Long Range

$46,990

$43,990

6.4%

Ford Mustang Mach-E Premium AWD

$57,675

$53,995

6.4%

Ford Mustang Mach-E RWD Standard Range

$46,900

$46,000

1.9%

 

A significant player missing from this table would be Volkswagen. The company has been gaining ground on Tesla, especially in the European market.

 

We have a clear pricing strategy and are focusing on reliability. We trust in the strength of our products and brands.

– OLIVER BLUME, CEO, VW GROUP

 

This verdict could obstruct Volkswagen’s goal of becoming a dominant player in EV market, especially if more automakers join Tesla in cutting prices. For now, Tesla still holds a strong grip on the U.S. market.

 

Thank You Elon Musk!

Recent buyers of Tesla became furious when the company announced it would be reducing prices on its cars. In China, buyers even staged protests at Tesla stores and delivery centers.

 

Recent buyers not only missed out on a better price, but their cars have effectively devalued by the amount of the cut. This is a bitter turn of events, given Musk’s 2019 claims that a Tesla would be a valuable asset.

 

I think the most profound thing is that if you buy a Tesla today, I believe you are buying an appreciating asset – not a depreciating asset.

– ELON MUSK, CEO, TESLA

 

These comments were made in reference to Tesla’s full self-driving (FSD) capabilities, which Elon claimed would enable owners to turn their cars into robotaxis.


Tesla Announces Unbeatable Profit Margins


Infographic by: visualcapitalist

Share This Infographic On Your Site

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