In a bid to stimulate sales, Tesla, the electric vehicle manufacturer, reduced prices, leading to a record-breaking surge in vehicle deliveries in Q2, surpassing the previous year's number by over 80%.
Tesla's strategy to increase sales by reducing prices in competitive markets, such as the US, UK, and China, resulted in a notable spike in deliveries - totaling 466,140 in the quarter ending in June. Tesla's commitment to becoming a volume manufacturer has simultaneously driven the company to boost vehicle production to nearly 480,000 within the same timeframe.
Automobility's founder and CEO, Bill Russo, suggested that Tesla's decision to prioritize volume has significantly contributed to their sales boost, particularly for their higher-volume Model 3 and Model Y, in the face of price rivalry.
The company's decision to cut prices in China, its second-largest market after North America, was lauded as a smart and highly successful move by Dan Ives from Wedbush Securities. This price reduction strategy has allowed Tesla to compete with local electric vehicle manufacturers in the increasingly saturated market.
This weekend saw a surge in sales from major Chinese automakers, including Beijing-based Li-Auto, which reported record-breaking deliveries of 32,575 vehicles in June. Concurrently, Shanghai's Nio and Guangzhou's Xpeng saw delivery spikes of 10,707 and 8,620 vehicles, respectively.
While Tesla has seen increased competition worldwide and has had to contend with the impact of higher customer borrowing costs, the company has responded by lowering prices throughout the year. Tesla has asserted that its strategy is not to initiate a price war, but to enable large-scale affordability, as stated by Elon Musk on Twitter.
In April, the company announced no plans to stabilize vehicle prices, even though repeated price reductions had led to diminished profits. Tesla's Q1 revenue showed a significant rise of nearly a quarter compared to the previous year, primarily driven by increased car sales. However, the price cuts, coupled with increased raw material and commodity costs, led to a 24% dip in profits during the same period.
The company's financial performance for the second quarter is expected to be disclosed on July 19.