Recently, there has been heated discussion on the Internet about Tesla's global price cut. Yesterday, Tesla CEO Musk also said in response to the price cut: There are many people who want to buy Tesla cars but cannot afford them. These price changes have indeed affected ordinary consumers. Tesla's steep price cuts have created a wave of demand for electric vehicle sales, addressing concerns that a weak economy will dampen buyer interest.

At the same time, Tesla Musk said: Tesla’s demand in January was about twice its production. Tesla could sell 2 million vehicles in 2023 if there is no external interference. And pointed out that Tesla is indeed worried about economic uncertainty and will "accelerate the cost reduction roadmap and drive higher production rates" in the short term.

In fact, Tesla Musk also posted on social platforms earlier in response to the price cut, saying: "When Tesla's price falls, people who have already bought want a lower price, but if the price rises, people who have already bought Some people don’t pay Tesla the price difference, so be it.”

It has to be admitted that Tesla's price cuts have indeed led to an increase in its sales. Many stores have said that after the price cuts, the store traffic and transaction volume have increased several times. There are also media reports that after Tesla China announced a big price cut, it received 30,000 new car orders within three days. As for the reason behind Tesla's big price cut, Tao Lin, vice president of Tesla, responded: "Behind Tesla's price adjustment, there are countless engineering innovations, which are essentially unique and excellent laws of cost control: including but not limited to Vehicle integration design, production line design, supply chain management, and even millisecond-level optimization of the robot arm coordination route...start from "first principles" and insist on cost pricing."

Cost reduction is certainly one of the reasons for Tesla's price cuts, but the most fundamental reason may be related to Tesla's declining demand and overcapacity. Relevant data show that in the fourth quarter of 2022, Tesla produced 439,701 vehicles globally and delivered 405,278 vehicles. In the whole year of 2022, Tesla produced a total of 1,369,611 vehicles worldwide and delivered 1,313,851 vehicles. Judging from the data, Tesla's production capacity is excess.

So starting from the fourth quarter of 2022, it is understandable why Tesla will launch frequent price reduction promotions. Of course, this move also brought growth to Tesla's sales in the fourth quarter. Relevant data show that Tesla delivered 405,278 vehicles in the fourth quarter, a year-on-year increase of 31%. Among them, the delivery volume of Model S and Model X models was 17,147, a year-on-year increase of 46%. The delivery volume of Model 3 and Model Y models was 388,131, a year-on-year increase of 31%.

In addition, according to Tesla's 2022 financial report, Tesla's fourth-quarter revenue was US$24.318 billion, a year-on-year increase of 37%; net profit was US$3.707 billion; net profit attributable to common shareholders was US$3.687 billion, a year-on-year The growth rate was 59%, and both revenue and net profit reached record highs. Or because of price cuts and promotions, Tesla’s gross profit margin in the fourth quarter was the lowest in recent years, falling from 27.9% in the previous third quarter to 25.9%. However, Tesla said about its performance in the fourth quarter: the fourth quarter of 2022 is a record-breaking quarter, and 2022 is also a record-breaking year. Tesla CEO Musk also said that 2022 will be the best year ever for Tesla at all levels.

Regarding price cuts, Tesla also stated that the average selling price of Tesla's electric vehicles has generally shown a downward trend over the past few years. To become a manufacturer of electric vehicles with millions of vehicles, it is necessary to improve the affordability of products. Although the average selling price of Tesla's electric vehicles has been halved between 2017 and 2022, our operating margin has continued to improve, improving from approximately -14% to 17% over the same period. The increase in operating profit margin was mainly due to factors such as the introduction of lower-cost models, the addition of more efficient local chemical plants, lower vehicle costs and operating leverage. Judging from Tesla's expression, it is not ruled out that Tesla will continue to cut prices in the future. In this regard, some insiders pointed out that Tesla's profitability provides room for it to cut prices and put pressure on competitors.