Tesla unlikely to further decrease price of China-made vehicles

Shanghai (Gasgoo)- As Tesla has basically achieved its target of auto parts localization in China, it is unlikely to see further reduction in the prices of made-in-China Tesla cars in the future, according to a local media outlet, quoting Tao Lin, Vice President of Tesla China Foreign Affairs.

Ms Tao revealed there is still the probability that the car price will rise if the prices of raw materials and auto parts go higher.

However, some insiders said the room for potential price falls still exists. With the cost of making a China-made Model 3 EV working out to roughly 200,000 yuan ($30,650), the gross margin for the locally-produced Model 3s is estimated to be around 30%, which is much higher than that of its U.S.-made counterpart, said the report. 

The EV manufacturer has lowered the price of its China-built Model 3 for five times within one year since October 2019, sparking serious discussions among Tesla's users. For instance, the price of the Model 3 Standard Range Plus RWD has been substantially decreased to 249,900 yuan ($38,300) from 355,800 yuan ($54,520).

Tesla's CEO Elon Musk places strong emphasis on controlling costs. In an email to staff titled “Costs are extremely important!” Musk said thousands of good ideas were needed to reduce costs associated with parts, processes and designs.

“In order to make our cars affordable, we have to get smarter about how we spend money,” said Musk in the email that was sent in early December.

Tesla's gross margins inched up more than 250 basis points in the third quarter to 23.5%, while operating margins grew to 9.2%. A market research institute expects its global gross margin to grow to 22% in 2020 from 17% in 2019.

In the third quarter, Telsa delivered 139,300 vehicles worldwide, around 34,000 units were sold in China. According to the China Passenger Car Association (CPCA), the cumulative retail sales of the China-built Model 3s reached 111,645 units in the world’s largest auto market as of November.