Electric carmaker Tesla achieved a record-breaking number of vehicle deliveries in the second quarter of 2023 after implementing price reductions to stimulate sales. The company strategically lowered prices in key markets, including the US, UK, and China, to stay competitive against other manufacturers. This move seems to have paid off, as Tesla reported delivering 466,140 vehicles during the three-month period, marking an impressive 80% increase compared to the same period the previous year. Moreover, their vehicle production rose to nearly 480,000 units during the same timeframe.
Tesla’s CEO, Elon Musk, had earlier asserted that prioritizing higher sales with lower profits was the “right choice” for the company. Bill Russo, CEO of Automobility, stated that Tesla’s strategic decision to be a “volume manufacturer” was “the main contributor to the sales increase, as its mainly higher-volume Model 3 and Model Y benefitted from the price war.”
China, Tesla’s second-largest market, saw a notable increase in sales for local electric car makers as well. Li-Auto, Nio, and Xpeng, all Beijing-based companies, experienced substantial jumps in deliveries during June, indicating a fierce competition in the Chinese electric vehicle market.
“The price cuts in China have been a smart poker move that was massively successful for Tesla,” said Dan Ives from investment firm Wedbush Securities.
While Tesla’s price reductions and sales growth have been successful in boosting market share, the company has faced stiff competition and the impact of higher borrowing costs for customers globally. However, Tesla has remained committed to making their vehicles more affordable, citing a focus on scale rather than starting a price war.
“We’re not ‘starting a price war’, we’re just lowering prices to enable affordability at scale,” said Mr Musk on his Twitter.
In their upcoming financial results for the second quarter, Tesla’s approach and performance in the market will be closely scrutinized. Despite facing challenges, the company’s strategic decisions and strong sales numbers will continue to be closely followed by industry experts and investors alike.
