Tesla Dominates Profits Per Car, Price Cuts ‘Nuclear Option’ vs Weaker Automakers
A new analysis of profitability data from Reuters suggests that Tesla is wielding its profits as a weapon in its recent price cuts, which some are now referring to as a price war.
Tesla now earns more per car than any other automaker across the globe, as shown in the industry data.
In the third quarter of 2022, Tesla was earning $15,653 in gross profit per vehicle, more than doubling the profits of Volkswagen, quadrupling those of Toyota and earning more than five times as much per delivery as Ford.
Tesla raised prices on its electric vehicles (EVs) throughout much of last year, before cutting prices on its Model 3 and Model Y offerings in nearly every worldwide market in which they’re for sale in recent weeks.
The following chart created by Reuters shows a stunning command of Tesla’s profit lead in the auto industry:
As a result, other automakers including GM face challenges to their previous profit-over-volume strategies heralded since the 2008 recession. These attempts were further embraced during the early days of the COVID-19 pandemic.
On top of that, EVs are still growing as an emerging technology and are increasingly becoming the preferred style of car for new auto consumers who can afford them.
“Tesla has taken the nuclear option to bully the weaker, thin margin players off the table” in China, said Bill Russo of the Shanghai-based auto consulting firm Automobility. “Big pie, fewer slices, more to eat for those that remain.”
Other EV companies reacting to Tesla’s recent price cuts include China’s Xpeng and Vietnamese automaker Vinfast.