The upcoming Tesla Model Y made-in-China could increase Tesla’s sales in the important market by a factor of 4 with a cheaper version, says analyst.
Tesla is preparing to launch its second vehicle produced at Gigafactory Shanghai: the Model Y.
For the past 9 months, Tesla has been expanding the factory to prepare for the production of the electric SUV.
The plant more than doubled in size to prepare for the production of the Model Y.
Tesla never confirmed the planned production capacity of the Model Y at Gigafactory Shanghai, but now a report from a local analyst suggests that it could quadruple Tesla’s sales in the country.
Tianfeng Securities, a brokerage firm that has been following Tesla closely in China, said in a new note to clients that they see Model Y sales reaching 30,000 units per month:
Tianfeng Securities also predicts that after mass production of China-made Model Y, monthly sales are expected to reach 30,000, and annual sales are expected to reach 360,000. It is estimated that Tesla’s overall sales will reach 880,000 in 2021, an increase of 76% year-on-year. And sales in 2022 will reach 1.28 million, an increase of 45% year-on-year.
Over the last quarter, Tesla delivered just over 10,000 Model 3 vehicles per month in China.
However, the Model Y would need to come with a cheaper option for Tesla to achieve this volume.
Tianfeng Securities analyzed Tesla’s made-in-China Model 3 pricing and Model Y US pricing to determine that Tesla could bring down the price of the entry-level Model Y in China to just 275,000 yuan:
“Tianfeng Securities released a research report that, from the perspective of Tesla‘s overseas pricing strategy, the price difference between Model Y and Model 3 is only 6-9%. Therefore, after Model Y is mass-produced in China, it is expected that Tesla will continue to implement the price reduction strategy. The entry price is expected to drop to 275,000 yuan.”
That’s roughly the equivalent of $41,000 USD or signficantly less than the current starting price of the Model Y in the US, but Tesla currently only offer the electric SUV in two trims.
A cheaper rear-wheel-drive option is expected to come soon.
Earlier this year, Tao Lin, vice president of Tesla China, said that Model Y electric SUVs will roll off the line at Gigafactory Shanghai in Q1 2021.
That seems like an optimistic look, but it’s not impossible because you can’t underestimate the small SUV/crossover segment in China.
Chinese EV startups like Nio and Xpeng focused on it with their first electric vehicles and they have been doing very well.
I wouldn’t be surprised if Tesla does well in the segment too with Model Y.
But Tianfeng Securities is right, they will need to have a cheaper version available.
Based on Tesla’s costs and pricing strategy with the made-in-China Model 3, I don’t think that’s going to be a problem.
However, I think 880,000 units in China for Tesla next year is too aggressive. If production starts early in Q1, it will not ramp up fully until the second half of the year.
Also, Tesla should expect Model Y sales to cannibalize a percentage of Model 3 sales in the country.
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