Tesla posts modest rebound in China sales after massive price cuts as Elon Musk’s ‘Secured Financing’ trial begins

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Analysts have been waiting impatiently to gauge whether Tesla’s aggressive price cuts in the key Chinese market are enough to rescue dwindling demand for its electric vehicles. Well, the weekly insurance figures for electric vehicle sales in China that were released just moments ago give room for optimism.

Source: Reuters

As a refresher, Tesla has pursued an aggressive price-cutting strategy across its major global markets in recent weeks to fend off a sustained decline in sales. For example, in the first two weeks of January, Tesla cut the price of its electric vehicles by up to 20 percent in the United States to allow Model Y variants to qualify for a $7,500 federal tax credit. Similarly, the European Union saw a discount of up to 17% on some variants, while China received another price cut of up to 14%. Keep in mind that Tesla slashed the prices of its electric car in China in late 2022 as well, prompting a slew of buyers to protest being denied such lucrative price cuts recently.

Going back, as evidenced by the tweet above, Tesla managed to sell 12,654 EVs in China between 09y and 15y January. For comparison, the company only managed to sell 2,110 vehicles in the first week of January.

Crucially, even after recent price cuts in China, Tesla still maintains a gross profit margin of about 10 percent on every car sold, which equates to a gross profit of about $3,000 per car. Moreover, unconfirmed reports indicate that the rise in orders after the price cut has already exceeded November 2022 totals.

However, we will withhold our judgment on the effectiveness of these price cuts until the eventual increase in sales volume is reflected in the difficult Chinese sales data. According to the trend obtained from China’s latest weekly insurance figures for electric vehicles, Tesla is still running below its September 2022 pace of selling 18,000 units per week.

Meanwhile, on what could be a major distraction for Tesla investors this week, Elon Musk is scheduled to appear in court today as his class action lawsuit against the Tesla CEO begins his 2018 “secured financing” tweet.

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