Tesla's Strategic Shift: 2025 Model Y Expansion and China Market Dynamics

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Tesla also has an exclusive piece of news today. The company plans to launch a 6-seater Model Y in 2025. Insiders say the launch will take place at the end of 2025. This is also a move to cope with the competitive environment in China.

Since the beginning of this year, domestic manufacturers in China have launched at least four competitors to the Model Y, including the Ledao L60 under NIO and the Zeekr 7X. They all offer more spacious interiors and lower prices.

Tesla introduced the Model Y in 2020. Many users have expressed that Tesla's cars have long lost their initial appeal, and the designs have become outdated. Therefore, Tesla is undergoing a refresh. The refresh is still in progress, with a project named Juniper, expected to be launched at the beginning of 2025, featuring a 5-seater version. However, this launch date is delayed; the original plan was for this year.

Nevertheless, despite the design being criticized by users, in August, Tesla recorded its best month in China this year, selling over 63,000 vehicles, a 37% increase compared to the previous month, although it is slightly lower than the nearly 65,000 vehicles sold in the same period last year.

This performance is mainly due to the increased sales in China's third and fourth-tier cities. In July, Tesla's sales in third-tier cities surged by 78%, and in second-tier cities, such as Nanjing and Hangzhou, sales also rose by 47%. This momentum is expected to have continued into August. Government support is also indispensable, with some local governments beginning to allow official purchases of Tesla vehicles in addition to subsidies. The company's 0% interest loan strategy has also boosted performance.

It should be noted that the aforementioned 63,000 figure is Tesla's local sales data in China. In August, according to official data from the China Passenger Car Association, Tesla sold a total of 86,700 vehicles, including exports, higher than the 74,000 in July. Of course, this sales volume is still a significant gap compared to the local leader BYD. BYD sold 373,000 vehicles in China in August, a 36% increase year-on-year. Xiaomi also delivered 10,000 vehicles. Many observers are pinning their hopes on the approval of Tesla's autonomous driving by the end of the year, hoping it will further promote sales.

I believe that the third quarter will see a good sales report for Tesla, at least in China, where a new record is expected to be set. This is a positive boost for short-term stock prices, but from Wall Street's perspective, what's more critical this quarter is whether Tesla's gross margin has further improved. This is key to reversing the pessimistic expectations for the automotive business.