Tesla’s profit margin has been impacted as it prioritizes sales, resulting in a decline in the automotive gross margin. In the first half, the gross margin from automotive sales fell to 17.9 percent, down from 27.8 percent in the previous year, according to calculations by Reuters.
On the other hand, BYD’s financial disclosure revealed a positive trend in its automotive gross margin. It increased to 20.67 percent in the six months ending in June, representing a 4.36 percent growth compared to the previous year. Citi analysts attributed this improvement to the automaker’s advantage in scale production.
In a surprising move, Tesla launched an updated version of its Model 3 in China. The starting price of this new model is now 12 percent higher than the previous base rear-wheel drive model.
Not only Tesla, but other players in the market are also seeking to introduce more affordable models. This has intensified the competition, with smaller rival Xpeng and newcomer Xiaomi joining the race.
Xpeng announced its plan to release an A-class model at a price of 150,000 yuan ($20,571.62) under a project called MONA. This move follows the acquisition of ride-hailing giant Didi’s smart EV unit in late August. While Xpeng’s existing models are priced above 200,000 yuan, this new model aims to cater to a broader market segment.
Furthermore, Xiaomi, originally known as a budget phone manufacturer, has obtained approval from China’s state planner to venture into EV production as well.
The challenges faced by these companies are compounded by a decline in car sales, despite efforts to stimulate consumer spending. China’s post-pandemic economic recovery is faltering, and major banks have expressed concerns that the country may fall short of its 2023 growth target of approximately 5 percent.
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