Tesla May Start Raising Model Y Prices in China, Boosting Margins
A local source suggests that Tesla is considering raising the Tesla Model Y price in China. If it is true, it could be seen as positive news for investors, as it would potentially improve the company’s profit margins.
In 2023, Tesla has been actively reducing the prices of its vehicles, beginning with the Chinese market. This action has rendered their cars more accessible, attracting a significant influx of new customers who were unable to afford Tesla vehicles at the initial time. This strategy has proven to be highly successful, as even amidst economic slowdown and inflation, consumer demand for the company’s products has still remained.
While Tesla maintained its market share, the consistent reduction in Tesla Model Y price did not align with the preferences of certain investors. These price reductions cause a compression of profit margins. Nonetheless, recent reports from China indicate a potential change in Tesla’s strategy.
Multiple local media outlets have suggested that Tesla might raise Tesla Model Y price in October, based on information sourced from a local Tesla dealer.
The company may terminate its program of providing 3,500 yuan ($480) referral incentives to Model Y buyers as soon as this week, potentially followed by an upward adjustment in prices, as stated in the report. The potential price increase, according to the source, could range from 8,000 to 10,000 yuan ($1,095 to $1,370). Given the absence of concrete evidence supporting the report’s claims, it’s advisable to treat this information with caution.
Furthermore, the source indicated that the company might give up the rear-wheel-drive variant of the Model Y, which had been Tesla’s top-selling model in China. This version incorporates all the latest enhancements in the updated Model 3. According to the source, the price of the Model 3 will remain steady at 259,900 yuan.
An increase in vehicle sales prices could send investors a positive signal about margins and demand. This will mean that demand continues to grow and the company can improve margins.
Historical Tesla Model Y Price
Photo from CarGurus
Let’s now examine the Tesla Model Y price trend in the United States over the same three-year period from 2020 to 2023 but with adjustments made for inflation, which represents today’s currency value.
Upon adjusting for inflation, we observe that the Tesla Model Y price reached its zenith in 2022 when it amounted to $62,549 (in today’s currency). Conversely, its lowest price was recorded in 2020, at $56,504.
Even when accounting for inflation, the most significant price increase for a Tesla Model Y still occurred in 2022. However, this $6,094 increase actually felt like $4,313 to consumers due to the impact of inflation.
