Popularity of electric vehicles cools, Chinese companies’ low-price offensive sales fall 9%, biggest drop in 12 years Tesla stock price rises 13% in after-hours trading after Musk’s comments about producing low-cost models
“Net profit halved” earnings shock Tesla “launches a low-cost electric car early next year”
Tesla, a symbol of electric vehicles, saw its net profit fall by 55% in the first quarter of this year (January to March) compared to the same period last year. First quarter sales also fell by 9%. This is due to Tesla’s declining profitability due to the offensive of low-cost electric vehicles made in China. CEO Elon Musk said on the 23rd, “We will be able to see (low-cost) vehicles in early 2025.” With Tesla joining the ranks, the competition for low prices for electric vehicles is expected to intensify further. 》
Tesla, an American electric vehicle company, announced on the 23rd (local time) that net profit in the first quarter (January to March) fell by 55% compared to the same period last year. First quarter sales were $21.31 billion (about 29.3 trillion won), a decrease of 9% compared to the same period last year. This is the first decline since the second quarter of 2020, when the production line was hit by the new coronavirus infection (Corona 19), and the biggest decline since 2012. Free cash flow was also negative by about $2.5 billion. However, despite the ‘earnings shock’ performance, Tesla CEO Elon Musk said, “We will see (low-priced) vehicles in early 2025,” and said, “We will increase sales with low-priced models and rush into the future with humanoid robots and autonomous driving.” When the company announced its intention to do so, the stock price rose 13.3% in after-hours trading. Stock prices of domestic secondary battery companies such as LG Energy Solution and Samsung SDI also rose on expectations that competition for electric vehicles will intensify, focusing on low-priced models.
● “The moment that determines Tesla’s success or failure”
Tesla’s poor performance was anticipated due to the previously announced drop in deliveries of Tesla vehicles. CEO Musk said in a conference call that day, “There have been unexpected challenges,” citing the slowdown in global demand for electric vehicles and the halt in production at a German factory. Analysts also told the Washington Post, “This is a ‘make or break’ moment for Tesla, which is struggling due to fierce competition from China and uncertainty about the outlook for the electric vehicle market.”
However, as for traditional automakers like General Motors (GM) shifting their focus to hybrid vehicles because of “the cold wind of electric vehicles,” CEO Musk said, “This is not the right strategy.”
Regarding Tesla’s announcement in its earnings press release that it will “start producing a new line of cars, including cheaper models,” CEO Musk expressed confidence that “we’ll be able to see (low-cost) vehicles in early 2025. ” CEO Musk personally denied reports that the plan to launch Model 2, a low-cost electric car at a price of $ 25,000 (about 34 million won), has been canceled. Currently, Tesla’s cheapest ‘Model 3’ costs around $39,000.
Tesla’s stock price rose significantly in after-hours trading after CEO Musk’s comments about producing low-cost models. The market deemed the low-priced model could be a breakthrough in Tesla’s slowing profits and stimulate demand for electric vehicles.
● “The competition for low-cost electric vehicles will intensify.”
In the car industry, competition over low prices for electric vehicles is expected to continue for some time. The reason for this is that although the ‘electric vehicle (temporary slowdown in demand)’ is deepening, electric vehicle companies are trying to win back the minds of consumers through price reductions. The recent offensive by Chinese electric vehicle companies with low-priced vehicles is also a factor encouraging low-priced competition.
BYD China released the ‘Seagull’, an electric car with a starting price of just $10,000 last year. Xiaopeng, a Chinese electric vehicle company, also announced plans to launch a low-priced brand and launch entry-level vehicles at half the current selling price (200,000 to 300,000 yuan). In the midst of China’s low-price offensive, Kia also launched ‘EV3’, a compact electric vehicle expected to be priced around 30 million won in the first half of the year (January to June), and Hyundai Motor Company launched ‘Casper’, a compact electric vehicle price of 20 million won, in the second half of this year (July to December). Competition for Tesla’s low-priced models next year is expected to heat up even more.
CEO Musk said on this day, “Tesla is an artificial intelligence (AI) robotics company,” and reiterated that he would not limit himself to electric vehicles. “Anyone who doesn’t believe we can solve the autonomous driving problem shouldn’t be an investor in Tesla,” he said. He also announced that the humanoid robot ‘Optimus’, which Tesla is developing, will be produced at the end of this year and will be sold externally next year. Tesla has previously released videos showing Optimus making coffee and doing yoga.
New York = Correspondent Kim Hyun-soo kimhs@donga.com
Reporter Jaehee Han hee@donga.com
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