Tesla is, once again, proving that its ability to manipulate prices on a regular basis has big benefits.
As expected, Tesla sees a huge uptick in orders in Japan. This comes after the company reduced Model 3 prices by up to 24% in the country.
As we recently reported, Tesla has once again adjusted prices and model offerings in various locations. However, the biggest news was the recent substantial Model 3 price drop in Japan. Right away, as soon as Tesla lowers prices, skeptics point to a lack of demand, but it continues to be proven that’s not really the case.
Regardless of some reports, it seems Tesla is not dealing with a demand issue. If the electric automaker could build more cars at a faster rate, it would likely sell all of them. In fact, Tesla has made it clear time and time again, there is no lack of demand for its vehicles, and there’s a reason it’s currently building several factories across the globe. However, it can (and often does) play with pricing schemes to encourage even more people to place orders, though it seems to be an effort to “shift” demand more than anything else.
Volume is arguably much more important than margins, though reduced production costs and economies of scale likely allow Tesla to reduce prices, sell more cars, and not take a significant hit to margins.
While Tesla’s pricing strategy increases demand, a better way to look at it is “steering” demand. The automaker can change demand in various markets based on pricing schemes and model offerings. Earlier in each quarter, Tesla focuses more on global markets. Toward the end of each quarter, the automaker focuses on domestic deliveries on our shores.
Now that Tesla is building cars in two global factories, it can use the price reductions to ramp up demand in areas where it can build a surplus of vehicles. At the same time, it can focus on other efforts elsewhere. Remember, the Fremont factory was closed for a few days recently, and Tesla is focusing on the newly refreshed Model S and Model X in the U.S., which, according to Elon Musk, are in high demand.
According to a recent report from Teslarati, Model 3 delivery estimates in Japan have been pushed back to 12 to 16 weeks. Prior to the price drop, delivery time was estimated at just 6 to 8 weeks. Shoppers in Japan who want their Model 3 right away can choose a stock model.
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