For weeks a topic has been hovering over the automotive industry: costs and profit margin. Especially when we talk about the electric car, which is causing significant costs to a large part of the companies. Tesla, however, is where he wants at the right time.
profit margins. It’s not the first time we’ve talked about them and probably not the last. Volkswagen has been the one who has emphasized its position in recent days with its blunt “we are not an NGO”. The message has been clear and direct: if selling an electric car for less than 25,000 euros does not give them a profit margin of at least 6%, they are not interested.
The warning for consumers who expect a drop in prices in the short term is strong. Europe has seen its cars become more expensive (and a lot) in recent years and it does not seem that electric cars (with lower volume production and, therefore, higher fixed costs) are going to be the salvation that guarantees a drop in the short term term.
The objectives of automotive companies are usually set at a profit margin of between 10 and 15%. Vehicles with large masses tend to move at smaller margins and those with lower volumes but much higher prices can play with this figure until it shoots up and offset the greater risks.
28.5%. For many years, Tesla has lost money. However, the investments have been maintained and, finally, time has ended up proving the firm right. Having produced only electric vehicles from the start has allowed the company to avoid a costly conversion of its assembly lines, as traditional manufacturers do.
Because the electric car is easier to produce and requires less labor, Tesla can produce much faster and at a lower cost, earning much more money for each car sold. In addition, it has managed to get performance out of huge presses when it comes to assembling its chassis. The result: its profit margin is 28.5%.
a dominant position. Sown all of the above, now Tesla reaps the fruits of it. Although the company assured that it would never do so, those of Elon Musk are launching continuous offers to play with the demand for their electric vehicles. That the Tesla Model 3 suffers in sales? It is not a problem, we will reduce it by 10,000 euros in a matter of three months.
There are those who have responded to these discounts, such as Ford, and there are those who have preferred to charge against Tesla, such as Luca de Meo, CEO of Renault. The company has managed to place its Tesla Model 3 below 40,000 euros and, at that price, very few (or none) rivals can overshadow them.
To this is added that the rest of the manufacturers have very little room to act. According to Reuters, the margin per car sold between Tesla and other firms is overwhelming. Volkswagen or Toyota have not stopped seeing how their profit per vehicle has been shrinking in the last two years. Mercedes has had to make the Mercedes EQE much more expensive to make it profitable and it is the reason why manufacturers prefer to sell fewer units at a higher price.
the negative side. The positive face for the client is evident clearly. If prices go down, money is saved on the purchase. However, some analysts They have been warning that the continuous sales are a double-edged sword. In China, the price war has led to more than 20% of cars of the market have seen their price reduced by 10,000 yuan. They are little more than 1,300 euros to change but the impact in the Asian country is so great that some car has lowered its price by 40%.
From Bloombergpointed out that this unbridled race can make the buyer get used to these prices and make it difficult to raise them again, that some manufacturers go bankrupt or that they simply have to worsen their manufacturing process in order to compete on price.
Tesla already wins the first battle. And this is what has happened to XPeng. In the report of ReutersIt was already pointed out that XPeng was playing at a loss with the electric car. It was even said that with each car sold, more than $11,000 was lost. The presentation of your new platform at the Shanghai Auto Show it has gone just that way.
In it, it has been announced that they hope to reduce the cost of the battery by 25% but, above all, the reduction in costs in autonomous driving functions is striking, aspiring to a 50% savings. The objective is not to be more efficient with the components that they already use, everything happens to reduce the use of radarschips, sensors and cameras based on lasers.
But once again, let’s not forget that Tesla has already gone down that path a long time ago, eliminating everything other than cameras. In fact, incorporating a huge battery of these components is being used as a claim premium. Volvo is a good example of this. It is not simply a matter of saving costs on the assembly line. XPeng now has to prove that it is competitive with fewer resources. It seems that Tesla is already gradually undermining its rivals.
In Xataka | Tesla has a plan to devour the electric car market: reduce its costs by 50%
Photo | XPeng
