Even as it reported record earnings this past week, electric carmaker Tesla, Inc. (TSLA) is already reorganizing its business strategy to boost profits. Two recent reports—one relating to its pricing tactics in China and another about a pivot in retail sales experience—provide clues to Tesla's business strategy. Together, they could set the direction for the car company's future earnings reports.
- Tesla is lowering the price of its cars in China to garner market share.
- According to reports, the company is also planning to overhaul its retail sales strategy to emphasize online sales.
- Together, these strategy changes could have a major impact on its future earnings.
Cheaper Teslas in China
A substantial portion of Tesla's deliveries this past quarter occurred in China. Almost all of them were for Model Y—its compact SUV. Amid increased competition from cheaper original equipment manufacturers (OEMs), the company has reduced the car's price in China to boost sales.1 That strategy contrasts with Tesla's approach in the United States, where it has raised prices on its Model 3 and Model Y cars about a dozen times in the past year alone, according to a Reuters report.2
This Tesla playbook is not a new one. The company reduced prices on several of its models after launch in the United States, only to hike them subsequently.3 It is likely that Tesla is following a similar strategy in China.
But the company might have to play a long game there. Gene Munster from Loup Ventures...
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