In an effort to secure what will probably be its greatest year to date, Tesla is betting on a significant sales surge in the first quarter of 2023.
In the past, Tesla has frequently relied on sales pushes at the end of each quarter and, most importantly, at the end of each year to achieve goals.
However, in order to achieve its production and sales goals for 2023, the company has adopted a new strategy and is prepared to implement it at any cost.
Tesla stated in its Investor Shareholder Deck for the Fourth Quarter and the Full Year 2022 that it would accelerate its cost reduction roadmap, sacrificing its high profit margins in exchange for an increased production rate and sales:
“In the near term we are accelerating our cost reduction roadmap and driving towards higher production rates, while staying focused on executing against the next phase of our roadmap.”
In the beginning of January, Tesla put its money where its mouth was by significantly lowering prices in numerous markets, particularly China and the United States.
This is one of the few times that Tesla uses practices at the beginning of a quarter to drive sales. In the past, the company has used strategies like discounts, free Supercharging, and other incentives to drive sales.
Tesla technically failed to meet its delivery targets for 2022, which called for 50% year-over-year growth. Tesla would technically have needed 1,404,258 deliveries last year to reach its production goal after delivering 936,172 vehicles in 2021. With 1,313,851 vehicles delivered in 2022, Tesla fell just short of its goal of 100,000 units.
The automaker is doing everything it can to meet its production targets, including lowering prices to increase demand. Its goal of 1.8 million vehicles by 2023 necessitates the production of 4,932 vehicles per day, which is actually doable. Tesla is already well on its way, with Shanghai and Fremont operating at full capacity and rumors of the California plant expanding.
Additionally, production is increasing in Berlin and Texas, and Austin will benefit from the Cybertruck’s volume. The pickup’s volume production phases, on the other hand, will not begin until next year, according to CEO Elon Musk.
In point of fact, Musk might be wanting more. He stated on the Earnings Call that Tesla may be able to produce more than 1.8 million units:
“Well — OK. I mean, our internal production potential is actually closer to 2 million vehicles, but we were saying 1.8 million because, I don’t know, there just always seems to be some freaking force majeure thing that happens somewhere on earth. And we don’t control if there’s like earthquakes, tsunamis, wars, pandemics, etc. So if it’s a smooth year, actually, without some big supply chain interruption or massive problem, we actually have the potential to do 2 million cars this year.”
A key sign that Tesla is willing to get 2023 off to a strong start rather than waiting until the end of the quarter is its commitment to increasing demand and sacrificing margins through price cuts. The price reductions increased Tesla’s addressable market, particularly for its mass-market Model 3 and Model Y vehicles, despite the fact that demand appeared to be relatively healthy already.
