Tesla makes more money from every car it sells than any of its global competitors. This fact is now being used as a great competitive advantage, allowing the manufacturer to capture more market share.
A Reuters analysis of industry data showed that Tesla was well ahead of most major competitors in terms of profit per vehicle. Previously, the company was one of the biggest losses in the automotive industry, but a series of strong actions in the right direction has changed the situation dramatically.
According to the analysis, Tesla earned $15,653 in gross profit per vehicle in Q3 2022, which is the highest of any car manufacturer. That is more than double that of Volkswagen AG, four times that of Toyota Motor Corp, and five times that of Ford Motor Co., so Tesla is effectively crushing the competition.
For much of last year, Tesla, like other manufacturers, went through several rounds of price hikes on its vehicles. A shortage of semiconductors and other materials has led to a decline in production in the automotive industry, allowing companies across the industry to focus on higher-margin models and earn high profits even as sales have fallen.
Tesla did not waste time and always invested a lot in research and development, which allowed it to create new technologies that reduce the cost of production at all stages. In addition, the manufacturer always strives to localize its supply chain, which allows significant savings. Tesla also standardized car designs to increase economies of scale. The company is now effectively using its manufacturing cost advantage to finance price cuts, challenging the profit-over-volume strategies that automakers have been using since the 2008 financial crisis.
While the media, some analysts and stakeholders are trying to point out that Tesla's aggressive price cuts are directed at other electric vehicle manufacturers, this is not true. Other EVs have never been what Tesla is fighting against; moreover, the company offers open access to its patents to absolutely everyone, subject to fair use. Tesla's only goal has always been and remains to combat cars with internal combustion engines. That is why the company is changing its strategy, which will allow electric vehicles to capture even more market share, and encourage other manufacturers to actively change their business models and invest in the development of high-quality and desirable electric vehicles.
© 2023, Eva Fox | Tesmanian. All rights reserved.
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.