Tesla’s strategy of sacrificing some of its sky-high margins to boost demand appears to be paying off, with a number of metrics supporting a more conducive view of the company’s burgeoning order book.
Over the past few months, Tesla has cut the prices of its EVs between 6 and 20 percent in key markets to counter softening demand, including price cuts of up to 14 percent in China alone. The company appears to be relying on its industry-leading margins to cushion the impact of these discounts on its bottom-line metric.
Now, Reuters has cited an internal memo that highlights Tesla’s plans to increase the production at Giga Shanghai to a weekly average of around 20,000 units for February and March 2023. This level of output, should it materialize, would almost match the company’s production level back in September 2022, when Giga Shanghai managed to produce 82,088 Model 3 and Model Y EVs.
Beginning in November 2022, Tesla had slashed the production at Giga Shanghai by a third. The company had also extended its production hiatus for the Chinese lunar new year through the end of January 2023.
Meanwhile, as we noted in an earlier post, Tesla disclosed during its earnings call for Q4 2022 that the orders for the month of January were running at around 2x its production capacity. Moreover, the company believes that it can prevent a drastic reduction in its automotive gross margin by eking out additional cost-savings and production efficiency gains. Consequently, Tesla expects its automotive gross margin (after regulatory credits) to remain above 20 percent in 2023, with an ASP of over $47,000. This means that the EV giant expects to earn an ex-RC gross profit of around $9,400 per car in 2023!
A few weeks back, reports emerged that Tesla had recorded 30,000 orders in just three days following steep cuts in China. Against this backdrop, the latest increase in the output at Giga Shanghai should be seen as a confirmation signal.
Source: https://tesladata.mattjung.net/total-new-inventory/
Meanwhile, Tesla’s total inventories have been declining in the US from their recent peak. These levels, however, still seem elevated when viewed against the trend in Q3 2022.
The post Rip-Roaring Demand: Tesla Increases Giga Shanghai Output to 20,000 Units per Week for February and March by Rohail Saleem appeared first on Wccftech.
