To The Moon

Yesterday, $Tesla Motors(TSLA)$ dramatically lowered the price of Model 3 and Model Y in China, causing a stir in the market. The Model Y fell below the 300,000 yuan, close to the prices of BYD-Tang EV and AITO M5, and lower than the price of $XPeng Inc.(XPEV)$ G9 and $NIO Inc.(NIO)$ ES6. 1. Tesla price cut is for? Some analysts believe that Tesla's move is intended to compete with $BYD COMPANY(01211)$. In the first half of this year, BYD achieved new energy vehicle sales of 641,000 units, more than Tesla's 565,000 units, becoming the global champion of new energy vehicle sales. In September, BYD's monthly sales exceeded the 200,000. Steve Wesley, a former Tesla board member, commented that For the first time, Tesla has a real challenger. In addition to BYD, Tesla has many competitors in the same price range: XPeng G9 model priced at 300,000 RMB. Nio launched ET5 with a minimum price to 258,000. Huawei-supported AITO M5 sells over 10,000 units in only 87 days. Prior to this price cut, Tesla's delivery cycle was significantly shortened from 4-5 months previously to 1-8 weeks. According to the third quarterly report released on October 19, Tesla's revenue and deliveries are lower than market expectations, and the annual target of 50% delivery growth rate may be difficult to achieve. Under the intensified competition, Tesla began to reduce the price. In mid-September, Tesla launched an 8,000 yuan insurance subsidy, which was considered by the market as a disguised price cut. 2. Tesla price war basis - high profit margins In the third quarter of this year, Tesla's gross profit margin was as high as 25%, much higher than Nio/XPEV/LI and BYD, as well as many new energy enterprises with negative gross profit margins. data from company earnings; compiled by Value_investing Tesla has low sales expenses as it insists on direct sales and 0 advertising. Its net income in the third quarter was a whopping $3.292 billion, with a net margin of 15.34%. China's new energy giants have yet to make a profit. Although BYD achieved a net profit of RMB 3.6 billion in the first half of the year, a surge of 206% year-on-year, the net margin is still only 2.6%. 3. Tesla to launch cheaper models In addition to price cuts for existing models, Tesla brought news that panicked its rivals during the earnings call: the launch of a new model based on the new platform Model X/S. Musk expects the production and sales of the new model will far exceed that of Model 3/Y. According to Musk, the cost of the new model will be cheaper than the Model 3 by half. According to this speculation, the price of the new model is likely to be around 150,000 RMB. If the Model 3 and Model Y are priced high, they have not yet touched the mass market. Even if the price is reduced, it is significantly higher than BYD and Chinese new energy car companies, but the new model of about 150,000 will compete directly with these car companies in the same price range. A fierce price war is about to take place, and new energy cars will not escape the fate of fierce competition from fuel cars after all. 4. Can BYD and other car companies survive in the price war? Compared to Tesla, BYD has 2 features. 1. hybrid models account for more than half of the total sales, while Tesla insists on pure electric. The two types of models face slightly different consumer groups. 150,000 Tesla may not directly touch BYD's base plate. 2. BYD has a strong industrial chain layout, its self-made battery, three electricity and chip, has a certain cost advantage. Tesla may not be able to affect BYD just by cutting prices or launching popular models. But if the price war continues, BYD's profitability may be affected. But China's 3 new energy car companies$NIO Inc.(NIO)$ $XPeng Inc.(XPEV)$ $Li Auto(LI)$ will be more affected From the current stage, Li and Nio focus on the high-end market of around 400,000, and do not compete directly with Tesla's main model and future mass models. However, the sales ceiling for high-end models is obvious. Nio and Li have been selling at around 10,000 per month for a long time and are slow to break through. The new L9 model of Li Auto will even backfire on the old model ONE. Therefore, the price band down is the inevitable choice, then they will compete with Tesla main model. $XPeng Inc.(XPEV)$ , on the other hand, started out focusing on the mass market. But unfortunately, the current P7/P5 is not a car can be called the flagship product. If the newly launched G9 remains unpopular, the capital market may continue to lose patience and the stock price may go down. As for other new car makers such as Leapmotor and Hozonauto, most of them focus on mass-market models, and the future competitive landscape is the worst. Investment considerations for new energy vehicles have switched from growth to earnings quality.