Summary
- Tesla's order backlog has decreased to an average of one to two months, indicating improved production efficiency and reduced waiting times.
- Tesla has been slashing prices for its flagship models, such as the Model Y and Model 3, in order to sell remaining inventory and increase commercial success.
- Tesla is facing tough competition in China and has been forced to cut prices in order to compete with other automakers in the country's electric vehicle market.
Tesla is associated with a few things: the Autopilot, making EVs cool, and late deliveries. That’s because the company has often been overwhelmed by massive backlogs. However, after opening a few giga factories, and learning how to speed up production, the waiting time has now decreased to an average of one to two months in the United States. Tesla's global electric car order backlog can notably provide a deeper insight into the dynamics of supply and demand. One of the most prominent sources for such information is Troy Teslike (@TroyTeslike/Twitter.) As of July 31, 2023, The renowned tracker has estimated the backlog order backlog at 54,000 units. The number represents an increase of 4,000 units since the end of June, and a 10 percent decrease since mid-July (60,000). This volume is the equivalent of around 18 days of manufacturing capacity, which has been the norm recently.
Tesla’s inventory went through a noticeable spike, from 86,926 units in the first quarter of this year, to 99,615 units in Q2. The fact that Tesla’s storage grew by almost 15 percent, despite delivering 4,66,140 units, testifies to an increase in commercial success. This could also mean that, in order to sell these remaining models, the eponymously named EV maker has started slashing prices for its flagship models.
Tesla Is Offering Discounts On The Model Y And Model 3
The best-selling Model Y and the more budget-friendly Model 3 have notably gone through a couple of significant price cuts this year, first in January, and then in April. These reductions were further enhanced with a free Supercharging package, and a few discounts. Furthermore, the Model Y and the Model 3 Performance recently became part of the few EVs eligible for the $7,500 tax cuts. In April, Tesla slashed prices for the entire Model Y line-up, the results were the following:
- Model Y AWD: from $49,990 to $46,990
- Model Y Long Range: from $52,990 to $49,990
- Model Y Performance: from $56,990 to $53,990
Recently, the Tesla Model 3 Rear-wheel Drive also saw its price cut by $3,210, taking it to $39,350. It is worth pointing out that this variant is also eligible for the $3,750, which puts its final MSRP at $35,600. These price cuts came after the electric SUV had already dominated the international sales charts in Q1. As a result, Tesla managed to maintain its hegemony in Q2, with a total of 466,140 units sold, marking an 83 percent YoY increase.
In addition to all of that, Tesla has also started offering three months of free Superchargers on new Model 3s delivered by June 30 in the U.S. and Canada. The motive behind these initiatives is unclear at the moment, but it is reasonable that Tesla might be trying to extend its dominance to the more budget-friendly side, before introducing the potential market-killer that is the $25,000 Model 2.
In China, Tesla Is Cutting Prices And Sacrificing Profit
While Tesla reigns supreme over the EV realm in Europe, and the United States, it still falls second to fellow automaker BYD in the People’s Republic of China. By “losing” to its Chinese counterpart, Tesla is somewhat “failing" to conquer the biggest EV market on the planet, as China accounts for one-third of electric vehicle sales worldwide. The comparison between the two automotive giants is tricky, considering BYD has a larger fleet, which includes a vast array of commercial vehicles and plug-in hybrids.
Nonetheless, it means that Tesla is not necessarily the poster boy of the e-segment in China. The latter has also become the scene of an ongoing price war between various automakers, which could be part of the reason why Tesla has recently cut margins on its panoply, amid what Elon Musk described as “turbulent times.”
- Model Y Long Range All Wheel-Drive: $41,310 (299,900 CNY) - down 14,000 CNY or 4.5%
- Model Y Performance: $48,198 (349,900 CNY) - down 14,000 CNY or 3.8%
Furthermore, the Model S and Model X both had their prices cut by 6.7 percent and 6.9 percent, respectively. According to Reuters, Tesla reported an overall gross margin of 18.2% for the April-June period, which marked the lowest point in 16 quarters.
These concessions seem to be in complete alignment with Elon Musk’s plans, who clarified "I think it does make sense to sacrifice margins in favor of making more vehicles," In July, the company sold 64,285 China-made electric vehicles (EVs), which represented a 31% decrease from a month earlier. The current strategy might pay dividends, and turn out to be necessary if the numbers continue to dwindle.
Enter Project Highland: A New Model 3 With Serious Potential
At this point, we’ve grown accustomed to the numerous spy shots of the refreshed Model 3, which might hit the market sooner than later. While the flagship electric sedan presents a decent combination of technology and performance for a relatively low price, it is starting to pale in comparison with new competitors, such as the Hyundai Ioniq 6, which offers a more premium feel to accompany the electric powertrain. And even though the Model 3 has managed to become one of the best-selling EVs of all time, it is still in dire need of renovation. To that end, the Texas-based automaker has been working on a new version of the Model 3, codenamed the "Project Highland."
Aware of the upcoming influx of promising, competitively-priced additions that are due in the next few years, Elon and Co. will likely get back to their initial winning formula: making EVs attractive. The Model 3, which is starting to look dated by the new standards, will likely boast a rejuvenating face-lift, with modern lines and better defined curves. The current soap-bar design should thus be enhanced with sleeker headlights, possibly equipped with Matrix LED technology. The front and rear bumpers might also be subjected to a bit of fine-tuning. More importantly, the renovated interior of the Highland should include the following features:
- Ventilated front seats
- Ambient LED lights
- Dual-pane glass roof
- Rear-seat touchscreen
- Steer-by-wire technology
- Yoke-style steering wheel
- Hardware 4 Integration
- Upgraded sound system
Tesla Model 3 Specs
Model 3 Standard | Model 3 Long Range | Model 3 Performance | |
Powertrain | Rear-Electric Motor | Dual-Motor Setup | Dual-Motor Setup |
Maximum Power | 271 horsepower | 435 horsepower | 455 horsepower |
Maximum Torque | 310 pound-feet of torque | 363 pound-feet of torque | 487 pound-feet of torque |
Acceleration (0-60mph) | 5.8 seconds | 4.2 seconds | 3.1 seconds |
Electric Range | 272 Miles | 333 Miles | 315 Miles |
According to Chinese outlet Autohome, Tesla will be upgrading its factory in the PRC around the last quarter of 2023, in order to prepare for the production of the new Model 3. The decision to introduce the Model 3 Highland at such a pivotal moment makes perfect sense, as it would bring extra attention to the brand, and help it maintain its hegemony over the global sales charts, before the other automakers can catch up. The only downside, however, is that this could considerably slow down both production, and deliveries.