Earlier this week, a report was released that revealed Tesla’s margins for the Model Y crossover in Shanghai. Guosen Securities, a Shenzen-based financial firm, found that Tesla holds a nearly 30% marginal rate on every unit. As the Model Y just recently began production and has become available for Chinese citizens to order, Tesla is already winning in 2021 as demand for the all-electric crossover is expected to be higher than the already-popular Model 3.
Peeking at the margins, it was reminiscent of the astronomical margins Tesla held early on with the Model 3 in Shanghai: 39.37%.
Breaking down the math for you all, an article I wrote earlier this week on the topic describes the price for manufacturing the vehicle and then compares it to the Made-in-Shanghai Model Y price for consumers.
“According to the Shenzhen, China-based financial firm, Tesla’s China Model Y only costs ¥237,930 (USD 36,852) to produce. However, its selling point gives Tesla a 29.4% gross margin with a price of ¥339,900 (USD 52,646.25). Due to the current demand for the all-electric crossover that just started being produced at Giga Shanghai, Tesla has plenty of room to come down. The company will likely do this after the demand is sustained for several months because the automaker did the same thing with the Model 3 after its initial gross margin was also turning Tesla a tasty profit.”
As a $TSLA investor, the margins made me feel great. Tesla is turning a sizeable profit on Model Y builds early on, and the margins are significantly higher than the automotive industry average, which sets around 8-10%. Holding 30% margins on any product, let alone a $52,000 car, is everything investors want. It means the company is pricing their vehicles to be competitive in a market where EVs are thriving, but it also means that Tesla is able to sell their car at a higher price while still being able to keep demand sustained.
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But it got me to thinking, does this mean that Tesla could technically drop the price of the Model Y in the future? The company would have the ability to still turn a profit and have a great margin that is higher than the auto industry average, but it would also create even more buzz for the car because it would be priced even lower than it already is. It is no secret that Tesla leads the industry in many ways, and a cheaper price tag for a Tesla EV would likely do a number of things that could be looked at positively: 1) Make a car more affordable, inching closer to price parity, and 2) Increase the number of vehicles on the road that dawn the Tesla T.
From an investor’s standpoint, it is tough to see an argument where lower margins are a good thing. We want competitive pricing, but why would we want it to be lower if the sales are there? Demand is healthy, there is no questioning that. Tesla showrooms in China were filled over the weekend with people looking to get a glimpse of the Model Y. Rumors have indicated that Tesla has already sold out of the car, showing that the vehicle was highly-anticipated and regardless of the price, people would buy.
Tesla showrooms get volunteer help amid Made-in-China Model Y launch
So what’s the big deal? Why would anyone want to decrease the cost of the cars?
From a consumer standpoint, lower prices are always better. Of course, wherever we can stand to save a few hundred, or even a couple thousand dollars on a car, we are going to do it. Of course, Tesla did away with price negotiations for cars (which is by far the most stressful part of buying a vehicle), so it’s not like owners can save money by wiggling down salespeople.
But looking at it from this point of view, Tesla has room to come down, and they’ve done it before. The Model 3, at the time of its release in China last year, was giving Tesla a massive 39.37% margin, and the price of the car was decreased five times in 2020. Based on estimations, Tesla could have margins around 25% on the Model 3 now, a nearly 15% decrease compared to the earliest projections.
There was wiggle room: Tesla did it once to reach the price point for government incentives, and others because production costs had gone down due to vertical integration. Grace Tao says there are probably no more price reductions in the future on the Model 3, but who knows what could happen.
The Model Y is a highly appealing vehicle due to its body style. Crossovers are some of the most popular cars on the market, and Tesla knows that. Elon Musk once said that the Y would overcome the 3 and be Tesla’s biggest seller. After the company released the Standard Range RWD variant on Thursday night, it is a good possibility to happen this year.
I think it is safe to assume that the Model Y will be a popular car in China just like the Model 3 has been. I think it is safe to assume that Tesla will really only battle with GM’s Wuling HongGuang Mini EV in that market this year. I also think it is safe to assume that Tesla isn’t going to adjust the price of the Model Y soon, considering the car just came out.
Moving forward, I think that consumers can assume that the Model Y will drop in price. Tesla will confirm that demand is healthy, and the company will continue to integrate parts of the car locally to save costs. This will bring the cost of the vehicle down anyway, so the price to the consumer will likely be adjusted accordingly.
There are advantages to keeping the margins high, especially with Tesla, because it is such a young company. Profitability will only increase, and Tesla will likely extend its consecutive quarter streak because of it. Tesla will make more money, sales will likely remain as demand is healthy, and shareholders will keep their smiles because the stock price will go up.
There are also advantages to cutting the cost: Tesla will move closer to parity with gas cars by adjusting the price, it will still have considerably higher margins than the auto industry average, and it will still make Tesla money, even if it is less.
I would love to hear your thoughts on the matter. I spoke to other investors, and they saw both sides as well, but of course, they felt the higher margins were more advantageous as their money is funneled into the company. I also feel that the high margins benefit me personally, but I would also like to see price decreases in the future to make the EVs more affordable.
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Elon Musk
Brazil Supreme Court orders Elon Musk and X investigation closed
The decision was issued by Supreme Court Justice Alexandre de Moraes following a recommendation from Brazil’s Prosecutor-General Paulo Gonet.
Brazil’s Supreme Federal Court has ordered the closure of an investigation involving Elon Musk and social media platform X. The inquiry had been pending for about two years and examined whether the platform was used to coordinate attacks against members of the judiciary.
The decision was issued by Supreme Court Justice Alexandre de Moraes following a recommendation from Brazil’s Prosecutor-General Paulo Gonet.
According to a report from Agencia Brasil, the investigation conducted by the Federal Police did not find evidence that X deliberately attempted to attack the judiciary or circumvent court orders.
Prosecutor-General Paulo Gonet concluded that the irregularities identified during the probe did not indicate fraudulent intent.
Justice Moraes accepted the prosecutor’s recommendation and ruled that the investigation should be closed. Under the ruling, the case will remain closed unless new evidence emerges.
The inquiry stemmed from concerns that content on X may have enabled online attacks against Supreme Court justices or violated rulings requiring the suspension of certain accounts under investigation.
Justice Moraes had previously taken several enforcement actions related to the platform during the broader dispute involving social media regulation in Brazil.
These included ordering a nationwide block of the platform, freezing Starlink accounts, and imposing fines on X totaling about $5.2 million. Authorities also froze financial assets linked to X and SpaceX through Starlink to collect unpaid penalties and seized roughly $3.3 million from the companies’ accounts.
Moraes also imposed daily fines of up to R$5 million, about $920,000, for alleged evasion of the X ban and established penalties of R$50,000 per day for VPN users who attempted to bypass the restriction.
Brazil remains an important market for X, with roughly 17 million users, making it one of the platform’s larger user bases globally.
The country is also a major market for Starlink, SpaceX’s satellite internet service, which has surpassed one million subscribers in Brazil.
Elon Musk
FCC chair criticizes Amazon over opposition to SpaceX satellite plan
Carr made the remarks in a post on social media platform X.
U.S. Federal Communications Commission (FCC) Chairman Brendan Carr criticized Amazon after the company opposed SpaceX’s proposal to launch a large satellite constellation that could function as an orbital data center network.
Carr made the remarks in a post on social media platform X.
Amazon recently urged the FCC to reject SpaceX’s application to deploy a constellation of up to 1 million low Earth orbit satellites that could serve as artificial intelligence data centers in space.
The company described the proposal as a “lofty ambition rather than a real plan,” arguing that SpaceX had not provided sufficient details about how the system would operate.
Carr responded by pointing to Amazon’s own satellite deployment progress.
“Amazon should focus on the fact that it will fall roughly 1,000 satellites short of meeting its upcoming deployment milestone, rather than spending their time and resources filing petitions against companies that are putting thousands of satellites in orbit,” Carr wrote on X.
Amazon has declined to comment on the statement.
Amazon has been working to deploy its Project Kuiper satellite network, which is intended to compete with SpaceX’s Starlink service. The company has invested more than $10 billion in the program and has launched more than 200 satellites since April of last year.
Amazon has also asked the FCC for a 24-month extension, until July 2028, to meet a requirement to deploy roughly 1,600 satellites by July 2026, as noted in a CNBC report.
SpaceX’s Starlink network currently has nearly 10,000 satellites in orbit and serves roughly 10 million customers. The FCC has also authorized SpaceX to deploy 7,500 additional satellites as the company continues expanding its global satellite internet network.
Energy
Tesla Energy gains UK license to sell electricity to homes and businesses
The license was granted to Tesla Energy Ventures Ltd. by UK energy regulator Ofgem after a seven-month review process.
Tesla Energy has received a license to supply electricity in the United Kingdom, opening the door for the company to serve homes and businesses in the country.
The license was granted to Tesla Energy Ventures Ltd. by UK energy regulator Ofgem after a seven-month review process.
According to Ofgem, the license took effect at 6 p.m. local time on Wednesday and applies to Great Britain.
The approval allows Tesla’s energy business to sell electricity directly to customers in the region, as noted in a Bloomberg News report.
Tesla has already expanded similar services in the United States. In Texas, the company offers electricity plans that allow Tesla owners to charge their vehicles at a lower cost while also feeding excess electricity back into the grid.
Tesla already has a sizable presence in the UK market. According to price comparison website U-switch, there are more than 250,000 Tesla electric vehicles in the country and thousands of Tesla home energy storage systems.
Ofgem also noted that Tesla Motors Ltd., a separate entity incorporated in England and Wales, received an electricity generation license in June 2020.
The new UK license arrives as Tesla continues expanding its global energy business.
Last year, Tesla Energy retained the top position in the global battery energy storage system (BESS) integrator market for the second consecutive year. According to Wood Mackenzie’s latest rankings, Tesla held about 15% of global market share in 2024.
The company also maintained a dominant position in North America, where it captured roughly 39% market share in the region.
At the same time, competition in the energy storage sector is increasing. Chinese companies such as Sungrow have been expanding their presence globally, particularly in Europe.
Brazil Supreme Court orders Elon Musk and X investigation closed
FCC chair criticizes Amazon over opposition to SpaceX satellite plan
