Mercedes-Benz claims the Chinese automobile market is “well-supported” despite Tesla’s recent price reductions for its electric vehicles.
On Wednesday, Mercedes-finance Benz’s head told CNBC that the company’s pricing of its automobiles in China is “well-supported,” despite competition from the United States electric vehicle behemoth Tesla, which recently reduced costs.
When asked about Tesla’s price cuts, Harald Wilhelm, CFO of the Mercedes-Benz group, told CNBC’s Julianna Tatelbaum, “We absolutely see the demand being good, but we also see the cost levels we put through into market being well-supported by the market in China.”
We aren’t trying to appeal to the masses; instead, we’re targeting the high-end or luxury market, which has historically shown to be less affected by economic downturns and other widespread disturbances.
For Mercedes-Benz, the biggest market is China. Compared to the same time a year before, when the German automaker only moved 132,579 vehicles, they sold 222,641 in the q3 of 2018.
On Monday, Tesla reduced the cost of its Model 3 and Model Y automobiles in China, one of the company’s most important markets, prompting these remarks from the CFO.
That came after Elon Musk’s automaker had already increased car pricing earlier in the year to account for growing expenses of production inputs.
The price reductions were made without explanation from Tesla. While the Chinese economy did see growth during the third quarter, it still faces several obstacles, such as the country’s strict Covid control policy, which has dampened consumer desire.
Price cuts by Tesla reflect increasing rivalry between Chinese electric vehicle manufacturers like Warren Buffett’s BYD and upstarts like Nio and Xpeng.
Mercedes-Benz is increasing its electric car capabilities, which will likely place it in more direct rivalry with Tesla while still relying mainly on sales of conventional combustion engine automobiles. Year over year, Mercedes-third-quarter Benz’s sales of electric cars increased by 39% to 84,850. But even at that, they only make up approximately 16% of the company’s overall sales.
Also discussed by Wilhelm of Mercedes-Benz was the troublesome supply chain that has plagued the car industry recently, in which essential semiconductors have been in short supply.
The supply chain situation has “improved,” Wilhelm added, but he is still “conservative” since demand is “being restrained by supply” – especially of semiconductors.
Some of these problems, he noted, would still be there in 2023.
Mercedes-third-quarter Benz’s profits were $5.18 billion, or 5.2 billion euros. This is an increase of 83% year over year.
KEY FACTS
- Mercedes-finance Benz’s head told CNBC on Wednesday that the company’s pricing of its automobiles in China is “well-supported,” even after electric vehicle manufacturer Tesla in the United States lowered costs.
- Monday saw a significant price drop for Tesla customers in China, one of the company’s most important regions.
- For Mercedes-Benz, the biggest market is China. The German automaker had a significant increase in sales in the nation during the third quarter, selling 222,641 vehicles compared to 132,579 in the same time last year.
