article Author: River Bend large, comment corpse, title figure from: Vision China < /span>
In November 2018, Tesla officially announced that the Model 3 is priced at 540,000 yuan. The price is not high enough for ordinary people to afford.
With Tesla’s efforts, in the past two years, Tesla’s electric vehicles have been produced globally, localized parts and components, and used lower-cost lithium iron phosphate batteries instead of ternary lithium batteries. , So that Tesla car prices have dropped significantly.
Take Model 3 as an example. According to the interface news data, as of October 2020, the price has been reduced 9 times, and the current official website price is 249,900 yuan(after subsidy) , the cumulative price reduction amount is as high as 290,000 yuan, and the price reduction rate is 54%. [1] Pull so that more people can enjoy the low-cost travel brought by new energy vehicles.
However, Tesla’s price cut did not win a good reputation in public opinion. Instead, many users who had previously paid for Tesla felt that they were treated as leeks by Tesla.
The higher the frequency and magnitude of price cuts of Tesla cars, the greater the number of criticisms of Tesla, and the final negative criticism of Tesla from offline physical stores to Tesla’s official Weibo account. , Everywhere, talk endlessly.
Some car owners ridiculed Tesla’s price cuts as “without any precautions and no worries”, car prices change erratic, and even give people a feeling that “Musk is pricing himself.”
There are even car owners who specially put the label of “Tesla Leek” on the rear of the Tesla they bought, to ridicule and protest.
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Tesla allows users to buy better new energy vehicles at lower prices. It was originally a thing that brought benefits to the society. All consumption should be happy. But in Tesla, why all Do consumers feel that they are losing?
This is a question related to economic pricing strategies.
1. What is Tesla’s pricing?
Tesla car pricing is constantly changing, which is related to its production cost and pricing strategy. To facilitate description and understanding, let’s talk about Tesla’s production cost first, and then Tesla’s pricing strategy.
Students who have taken micro-jing in college may remember that Adam Smith used the example of needle factory to make needles to describe the “economies of scale” phenomenon, that is, the cost of product production increases with the increase in production volume. And fell.
The “economies of scale” described by Adam Smith not only exists in needle factories, but also in most consumer goods industries, and automobiles are no exception. The longer a car is available, the more it is produced, and the cheaper it is.
The reason is that in the large-scale production of automobiles, the initial investment in automobile research and development expenses, design expenses, mold development expenses, and plant equipment expenses, etc., can be evenly shared among many automobiles, thereby effectively reducing manufacturing cost. The typical cost curve brought by the scale effect is as follows:
A typical cost scale curve
As a “new species” in the automotive field, Tesla electric vehicles are in the early stages of development. Take Model 3 as an example. The historical total production volume of Model 3 is small, but the output has risen fast. Fast? We can compare these two points with a traditional model.(such as Toyota Camry):
Tesla’s historical production volume is small, which means that Tesla is at the left end of the cost curve, and the scale effect is significant. With the rapid increase in the number of Tesla cars produced, the cost will drop rapidly.
On the other hand, there are so many and frequent price cuts of Tesla cars, in addition to the scale effect factor, there are some other external factors.
According to Sina Technology’s in-depth report “The Mystery of Price Reduction-Demystifying Tesla’s Car Sales in China”, Tesla’s price reduction process and time point follow that after Tesla’s entry into China, the localization and use of parts Factors such as the replacement of ternary lithium batteries by lithium iron phosphate batteries in the Ningde era are closely related. Changes in external fixed costs have further accelerated the decline in the cost of Tesla’s electric vehicles. [2]
So the price drop of Tesla cars is caused by the superposition of multiple factors. The cost curve should look like this:
If you were Musk, when you get a cost curve like this, how would you price it?
The high probability is this:
Okay, so far, you have the same ideas as Musk, and you can be scolded with him.
As the “pioneer” of new energy vehicles, Musk said in the second quarter of 2020 earnings call that “Tesla’s price is not close enough to the people. I want more people to enjoy the benefits of technology.”
So, Tesla needs to penetrate more people at lower prices and quickly seize the market[2] Therefore, it adopts the “penetration method of pricing”, which is a method of maintaining a low profit range to quickly gain market access.
This pricing strategy generally has nothing to do with supply and demand and the price of competitors. It is only related to its own cost. “As long as the cost decreases, I will reduce the price.” In this strategy, as long as the company maintains the advanced nature of production, it should be able to maintain market leadership.
As mentioned earlier, because Tesla’s cost is continuously and rapidly falling, and in line with the Tesla pricing strategy we introduced later, we see that Tesla’s price drops again and again, and there is no Expected decline.
This led to the phenomenon we talked about at the beginning: Tesla’s “timely profit” only makes car buyers at any point in time feel that they have become “taken on.”
2. How are traditional cars priced?
After reading this, you may have discovered a paradox that “increasing profits” may make consumers more satisfied.
This sounds a bit counter-common sense, but it has been proven in traditional automobiles and many consumer products.
The total production and sales volume of the traditional automobile market is stable. It is occupied by a few leading automobile manufacturers. Each has its own advantages and different audience positioning. In a mature market, automobile manufacturers no longer take “acquiring” market share as their main purpose. But to “maintain” the market share and maximize their own profits.
About 2000,China’s auto market is in short supply and extremely profitable, especially mid-to-high-end autos have surprisingly high profits. According to figures released by an authoritative statistical agency in the industry in Germany, in 2002, mainstream Chinese auto manufacturers performed surprisingly well, with average profits exceeding 22%. The branch office reaches 30%. However, with the increasingly fierce competition in the auto market, according to the annual financial report data of Toyota, Volkswagen, and BMW Group in 2019, the profits of most automakers have fallen to around 9%~12%.
In different environments and time points, the profit gap of traditional automakers is so large, which in fact proves that their pricing strategy takes more into consideration the market and competitors rather than their own costs.
What is the pricing strategy of traditional cars? Let’s review the demand price curve in the Weijing:
A scribbled demand curve
In such a simple (vacuum spherical market economy) price demand and supply curve, the pricing strategy should only be related to the quantity demanded. Manufacturers need to find out the current “highest price for the largest purchase volume”. Above the automobile cost line, the manufacturer finds the largest product of the sales volume and the selling price, and obtains the largest sales as the best price.
This will bring two effects: one is that the company can get the most profit, and the second is to make people who buy the car feel “wow, the value of my car is preserved”.
But for Tesla, it must be disdainful of this pricing strategy that violates the law of value. Therefore, in 2020, Tesla even experienced the phenomenon of “the price of the car has been reduced before delivery”. There is no reason to reduce prices when the supply of normal commodities exceeds demand, but Tesla has reduced it because production costs have fallen.
This phenomenon will never happen easily in the traditional automobile industry, because For traditional car manufacturers, even if the cost drops suddenly, as long as they can hide it, they would rather make this profit than make a profit. Make sales.
That’s where the market actually cuts leeksOperation, on the contrary, can soothe the emotion of “leeks”.
In the traditional automobile industry, the strategy of upgrading and not reducing prices will be widely used. During the 10 years of new car release, manufacturers have continuously introduced small, annual, mid-term, large, and smart upgrades. . If you are an old car owner, you will feel that your model “has never been reduced in price”, but although it is called the same name, the car is not that car long ago.
In addition, the price of traditional cars has always been very stable, which has a lot to do with traditional car sales.
Traditional automobile sales are mainly based on distribution agency sales(common 4S automobile sales experience store), the dealer’s sales price of the automobile After purchasing goods through auto manufacturers, dealers add tens of thousands to sell goods to consumers, and dealers usually have the final say.
In the way cars are sold to dealers, car manufacturers have weak control over commodity prices. This often happens when car manufacturers lower the prices of cars, and sales channels have the motivation to delay or conceal the price reduction of products in order to make money. Get more benefits.
Under the model of traditional automobile sales by dealers, the signal transmission of automobile prices becomes very weak, and it is not easy for consumers to detect price changes. In many cases, even if the price of a car is reduced, consumers are unaware. Weaken or hide the contradiction between car manufacturers and consumers caused by car price cuts.
In contrast to Tesla’s sales model, the national direct sales have a unified price, no dealers make the difference, and there is no middleman to buffer the price reduction. The price is more transparent, but it also brings more price to the manufacturer’s product reduction. Many risks and trials.
It can even be said that Tesla’s direct sales model has become a catalyst for Tesla’s price cuts to be complained by the market.
3. Can I learn Xiaomi and Apple?
Is it possible to not only make profits, but also make users feel “earned” psychologically? This is also possible.
[2] Geek Park: “Tesla dropped and dropped again, is it “cutting leeks”? 》
[3] Tiger Sniff: How does the second-hand “gray market” push up the average selling price of iPhone? 》
[4] Home of Drive: “The cost of Xiaomi 2 is hotly debated, and the analysis of Morgan Stanley claims 1,700 yuan”