Electric car manufacturer Tesla has announced that it achieved a new milestone by delivering a record number of vehicles in the second quarter, which ended in June.
This surge in deliveries can be attributed to the company’s decision to lower prices in key markets such as the US, UK, and China, in order to enhance its competitive position against rival manufacturers.
The strategy of reducing prices to boost sales seems to have paid off not only for Tesla but also for major Chinese car makers, who also reported a notable increase in sales during the month of June.
Tesla CEO Elon Musk has been vocal about prioritizing higher sales volumes even at the expense of lower profits, believing it to be the right choice for the company’s growth. This approach seems to be validated by the latest results.
On Sunday, Tesla revealed that it delivered an impressive total of 466,140 vehicles in the second quarter, marking a remarkable 80% increase compared to the same period last year.
Moreover, the company reported an uptick in vehicle production, reaching nearly 480,000 units in the same time frame.
“Tesla has made a strategic choice to be a volume manufacturer,” Bill Russo, the founder and chief executive of advisory firm Automobility, told the BBC.
“This was the main contributor to the sales increase, as its mainly higher-volume Model 3 and Model Y benefitted from the price war,” he added.
Dan Ives from investment firm Wedbush Securities told the BBC that “the price cuts in China have been a smart poker move that was massively successful for Tesla”.
China has become a significant market for Tesla, standing as the company’s second-largest market globally, trailing only North America. To maintain its competitive edge in the world’s second-largest economy, Tesla has resorted to cutting prices, as it faces competition from local electric car manufacturers.
Over the weekend, Beijing-based Li-Auto announced that its deliveries reached an all-time high of 32,575 vehicles in June, marking the third consecutive month of record-breaking sales. Additionally, Shanghai-based Nio and Guangzhou-based Xpeng reported significant increases in deliveries, with 10,707 and 8,620 vehicles respectively.
While Tesla has experienced robust growth in China, it has also encountered intensified competition both domestically and internationally, along with the impact of higher borrowing costs for customers. In response, the company has implemented price reductions throughout this year.
In April, Tesla explicitly stated that it had no plans to stabilize vehicle prices, despite the effect of repeated price cuts on its profitability. By adjusting prices to attract more customers, Tesla aims to maintain its market share and sustain its growth trajectory in the face of evolving market dynamics and rising competition.