After starting the day in the red due to the announcement of a price cut in China, Tesla (TSLA) turned positive after crowds reportedly flocked to stores to buy cars.
The only problem is that they weren’t there to buy but to protest.
Earlier today, we reported on Tesla lowers prices in Chinawhich has raised concerns about the automaker’s demand in the important electric vehicle market.
Price cuts on some Model 3 and Model Y trims have been significant, and while this will have a negative effect on the company’s gross margin, we expected it to be successful in increasing sales.
Shares of the company (TSLA) fell significantly in premarket trading following the news.
Now Tesla investors and fans are sharing stories of shoppers flocking to Tesla stores in China to buy following the price cuts:
Tesla’s stock has since turned positive and recovered from the slump that followed China’s price adjustment.
However, electric learned that most of the crowds that go to Tesla stores are actually there to protest price cuts.
Several recent Tesla buyer groups announced on Weibo that they were holding protests at Tesla stores across the country. Protesters are sharing videos on Weibo in China, and some of those videos are being shared in the United States as customers rush to buy following the price drop.
Tesla customers in China are used to protesting price cuts. They did it for the first time in 2019 following a rare price drop from Tesla and then again in October 2022 following a price drop.
The company has a famous policy of having constant prices with no discount, but it has moved away from this strategy lately.
As reports of a price cut trickled in from China in late 2022, Tesla officials strongly denied them.but the company specifically mentioned that no further price increases would occur in 2022.
Now, days after the end of the year, Tesla has dramatically lowered the price, and many customers who purchased in late 2022 are frustrated.
Grace Tao, Vice President of Tesla China, posted on Weibo today saying that the price drop is actually related to “technical innovations” (translated from Chinese):
Behind Tesla’s price adjustments, there are countless technical innovations, which are essentially unique and excellent cost control laws: including but not limited to vehicle integration design, design chain management, supply chain management, and even millisecond-level optimization of Route robotic arm coordination. …Start from “first principles” and insist on cost-based pricing. Respond to the country’s call with concrete actions to foster economic development and unleash consumption potential. 2023 Let’s welcome a better life together.
However, many people do not buy this explanation. Historically, Tesla has increased gross margins through cost improvements and only adjusted prices when necessary to create demand.
Electrok’s Grasp
Normally I wouldn’t support these protesters since they bought these vehicles at an agreed price, but it’s true that Tesla has sent mixed messages to buyers in China.
Also, does anyone really accept Tao’s explanation? I see a lot of Tesla blogs running with it without questioning it, but that hasn’t been Tesla’s MO.
Why would you reduce prices if people are buying at these prices? This has been Tesla’s way for the past two years.
The featured image: Photo of a Tesla protester in China from 2021.
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