Model Y and Model 3 — Top to Down Play

Author: ZHU Yulong
Original source: https://xueqiu.com/6659575183/167402446
Translation/edit: MoneyballR

Introduction

Yesterday, on the first day of 2021, Tesla announced official start of MIC Model Y sales. A dummy price tag was replaced with a more reasonable one and Model Y LR starting price is now RMB 399.9K, RMB 148.1K cheaper than the dummy one. Performance version is priced at RMB 369.9K, RMB 161.5K cheaper.

At the same time MIC Model 3 also saw adjustments. Model 3 LR was taken off the counter, while Performance price was cut to RMB 339.9K from RMB 419K.

My initial take mainly consists of several following points:

  1. I first heard that Tesla defined Model 3 and Model Y weekly production at 5K and 15K respectively, i.e. 200K units/week. Model Y will explore higher goals.
  2. Looking from price cut trends for imported Model 3, MIC LR and SR, Tesla which holds its price cuts high will continue to press down Model 3 and Model Y. Based on 2020 attack on A and A+size EV sedan market, 2021 will put pressure on SUV market. Since Model 3 and Model Y overseas price difference is only 6%-9% — US market already witnessed Model Y surpassing Model 3 — Model Y is incredibly competitive in SUV EV market.
  3. 100K orders in two days are the news coming out at the moment. From this number we can see that current sales restricted cities have a clear demand among personal consumers.

Model Y Price

Judging from the usual routine, Tesla always hikes up pre-sale prices. Last year August, Model Y LR and Performance pre-sale price was RMB 488K and RMB 535K respectively. This was the same situation as with Model 3 pre-sale price in 2019, which was at RMB 328K only to be eventually cut to below RMB 250K. The only difference is that Model Y cut was higher. The table below shows us what we can expect:

  1. Currently, Tesla will first promote Model Y LR, it has even stopped Model 3 LR in order to make way for R=600 km Model Y and let clients go for MIC Model 3 Performance. We can see that 2021 Q1 price will stay stable.
  2. Based on Model Y production ramp up curve, once the first 100K orders are consumed in 3–5 month (I understand that at this stage, LG Chem ternary battery will be used), LFP SR version will come out (CATL version) at a RMB 250–260K price. By that time, Model 3 price will move towards RMB 230K as to squeeze out another wave of demand. This will be the second stage in Q2-Q3.
  3. In Q4 when the production ramp up is done, the last pricing for 2021 might come out with LR going below RMB 300K, or around 280K after subsidies. Model 3 might go as low as RMB 210–220K, Model Y to RMB 230K-240K. If necessary, production can be increased to 500K volume.

Effect on other vehicles

As for NEV products, NIO ES6 will be affected the most. Although it is bigger and ranges are similar, NIO ES6 price is high and as NIO 2021 target is reportedly 100K it will come under huge pressure as it has to rely on service system in direct competition with another product.

As for Sino-foreign products, the effect on products such as iX3 and EQC which price is neither high nor low, will be especially high. VW ID.4 will also be significantly affected, because Model Y SR price might be at RMB 250–260K.

As for most of domestic EV SUVs, 2021 will also be challenging, because the demand will be sucked from above.

As for ICEVs, the first wave of demand will be certainly pressed out by sales and traffic restricted cities such as Beijing, Shanghai, Guangzhou, Shenzhen as well as Hangzhou and 2nd tier cities. At the moment, BBA compact and mid-size SUV pricing is faced with long-term attack. Tesla’s biggest contribution is that it slowly eliminates pricing advantage in luxury product pricing spectrum. These products driving up the sales cannot hold up and BBA will be under huge pressure as their own BEV and ICE products are conflicted, so it will be very hard for them to deal Tesla a blow.

Conclusion
2021 battery orders by all OEMs are expected to be high. With this wave of price cuts, a lot of these products thrown in the market will not have competitiveness and a lot of production capacity and quantity plans will not be plausible, especially when star products cut prices and put pressure on consumers.

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