Anxious Musk: Unveiling the Three-fold Dilemmas Behind Tesla's Price Hike
On July 1st, Tesla announced that the long - range versions of its two main models, the Model 3 and Model Y, had been upgraded. The core of this upgrade lies in the battery. Although the available battery capacity remains the same, the new chemical formula combined with overall vehicle optimization has led to an increase in the driving range. Specifically, the CLTC driving range of the Model Y Long Range has increased from 719 kilometers to 750 kilometers, while that of the Model 3 Long Range has risen from 713 kilometers to 753 kilometers.
Along with the increase in driving range, there have been adjustments to the price and configuration. The starting price of the Model Y Long Range remains at 313,500 yuan. However, it should be noted that this model had a price increase of 10,000 yuan in March this year. The changes to the Model 3 Long Range are more straightforward. It now comes standard with the “Acceleration Boost Package”, which was previously an optional extra. The 0 - 100 km/h acceleration time has suddenly shortened from 4.4 seconds to 3.8 seconds, crossing the threshold into the realm of high - performance cars. Its price has also increased by 10,000 yuan accordingly, with the starting price rising from 275,500 yuan to 285,500 yuan.
Just recently, the Xiaomi YU7 was launched with a configuration comparable to that of the Model Y, but with a starting price of only 253,500 yuan. Against the backdrop where almost all brands are trying to survive by reducing prices or increasing configurations without raising prices, Tesla's “price increase with upgrade” this time seems particularly unusual. This is not simply a cost - driven price increase, but rather a strategic exploration after careful calculation. To understand the complex motivations behind this move, it is necessary to comprehensively examine it in the context of Tesla's recent sales difficulties, setbacks in its technological narrative, and its increasingly obvious “Apple - like” trend.
The most direct background for this price increase is the growth bottleneck that Tesla is facing in the Chinese market and even the global market. There was a time when Tesla was the undisputed ruler of the electric vehicle market, with a sales growth curve so steep that it was astonishing. However, as time has passed, the market trend is changing. According to public data, Tesla's sales growth rate has significantly slowed down in recent quarters, and there has even been a year - on - year decline in some markets. Especially in the highly competitive Chinese market, Tesla's pressure is increasing.
On the one hand, Chinese domestic brands led by BYD are constantly eroding market share with their extensive product portfolios and highly competitive prices. BYD has not only long surpassed Tesla in total sales but is also closing in on it in the pure - electric vehicle segment. On the other hand, new - force brands such as NIO, XPeng, and Li Auto have established a foothold in the high - end market. The entry of technology giants like Huawei and Xiaomi into the automotive industry has brought new dimensions of competition and user expectations.
The popularity of the Xiaomi YU7 after its launch and the continuous strong sales of the AITO series of models have proven that Chinese consumers' comprehensive consideration of product strength, intelligent experience, and brand ecosystem has surpassed their blind faith in the “Tesla” label.
In such a market environment, the traditional business logic is to “sacrifice price for volume”. When sales are under pressure, price reduction is the most direct and effective means to stimulate demand. Tesla has indeed done so in the past two years and was one of the main initiators of the price war in the Chinese market. Several significant price cuts not only consolidated its market position but also dealt a heavy blow to its competitors. However, now it is doing the opposite. The first signal behind this may be that the pressure for profit has exceeded the anxiety about sales volume.
The automotive manufacturing industry is a capital - intensive and high - investment industry. Continuous price wars will seriously erode a company's profit margin. Although Tesla leads the world in cost control and has a gross profit margin far higher than the industry average, this advantage cannot withstand endless consumption. When the growth in sales volume cannot make up for the loss caused by the decline in profit per vehicle, maintaining a healthy financial situation becomes an urgent task.
For a listed company, Wall Street's expectations are not only about market share but also about continuous profitability. Therefore, the price increase under the guise of “upgrade” can be seen as an attempt by Tesla to stabilize or even increase the average selling price (ASP) per vehicle and the profit margin. It seems to be sending a message to the market: Tesla is no longer willing to participate in low - level price battles without a bottom line. It wants to safeguard its brand value and profit bottom line.
This price increase also reflects Tesla's “Apple - like” tendency in its product strategy. Currently, Tesla's market position, brand halo, and business model are highly similar to those of Apple at its peak. Both have pioneered an era with revolutionary products, have strong brand appeal and loyal fan bases, have built closed - loop ecosystems centered around software and services (Apple's iOS and App Store, Tesla's FSD and Supercharger network), and both highly emphasize vertical integration and self - research of core technologies.
Apple's product pricing strategy is exemplary. It never easily participates in price wars. Instead, it endows each new generation of products with higher value through continuous technological innovation and product iteration, thus supporting its high - end pricing. When the market requires more segmented products, Apple launches different versions such as Pro, Max, and SE to precisely target different levels of users, but the prices of its core product lines always remain firm.
The approach taken with the Model 3 Long Range this time captures the essence of Apple's strategy. It is not simply a matter of raising the price of the original product by 10,000 yuan. Instead, it bundles a significantly valuable “Acceleration Package” to enhance the product's performance by a notch. In this way, for consumers who pursue ultimate performance, this deal seems “worthwhile”, effectively offsetting the negative sentiment caused by the price increase. This is a typical “value - driven” price increase, aiming to screen out core users who are less price - sensitive but have higher requirements for performance and brand experience.
This shift in strategy means that Tesla may be moving from pursuing unlimited expansion in “quantity” to focusing more on steady operation in “quality”. It is no longer trying to meet everyone's needs with one or two models. Instead, it is starting to learn from Apple and maximize brand value and business profit through refined product segmentation and pricing strategies. This is an inevitable transformation from a “start - up company” to a “mature giant”.
However, the cornerstone supporting Tesla's “Apple - like” high - pricing strategy, its absolute leading position in the field of intelligent and autonomous driving, has recently encountered unprecedented challenges. This is the third key factor we must mention: the failure of the Robotaxi debut.
For a long time, Tesla's sky - high market value has not only been based on car sales but also on a grand future narrative, the core of which is FSD (Full Self - Driving) and the resulting Robotaxi network. In Elon Musk's vision, millions of Tesla cars will become fully autonomous robot taxis through software upgrades, forming a huge transportation network that will bring the company a continuous stream of service revenue far exceeding the profit from selling cars. This story is a key pillar supporting Tesla's trillion - dollar market value.
However, at the highly anticipated Robotaxi launch event, reality poured cold water on the enthusiastic expectations. The performance of the vehicles on display far fell short of the expected “fully autonomous” level. The hesitation, jerks during driving, and the lack of ability to handle complex road conditions all indicate that its technology still has a long way to go before reaching the real L4 or even L5 level of autonomous driving.
This “debut” not only failed to consolidate Tesla's leading myth in the field of autonomous driving but also exposed the real difficulties in the implementation of its technology, raising deeper doubts in the outside world about its technology roadmap and implementation schedule.
Once the narrative of Robotaxi is shaken, Tesla must rely more on its identity as an “automobile manufacturer” to gain market recognition. When the “vast expanse of the future” becomes distant, the “one - mu field” in front must be carefully cultivated.
This means that the profitability of the automotive business has become more important than ever. From this perspective, the price increase has become an inevitable choice. Since the software revenue from FSD is unlikely to become a pillar in the short term, more profit must be earned from the hardware of car sales to maintain the company's R & D investment and healthy operation and to continuously support the distant dream of autonomous driving. This is a compromise of ideal to reality and also a deep - seated strategic anxiety.
Tesla's price increase in the midsummer of 2025 is by no means an isolated market behavior. It is a complex decision made by Tesla under the intertwined “immediate concerns” of slowing sales growth and intensifying market competition, and the “long - term worries” of setbacks in the autonomous driving technology narrative and uncertainties in the future vision.
This is an attempt to move closer to the “Apple model”, trying to break free from the low - end price war through product segmentation and value creation, reshape the brand's high - end positioning, and stabilize the profit base. It is also a helpless move in the face of reality. When the dreamy halo of Robotaxi fades temporarily, the company must return to the essence of manufacturing and seek higher value returns from each car sold.
Of course, this move is also full of risks. In the highly competitive Chinese market, any slight price increase may drive potential customers into the arms of competitors. Are consumers willing to pay an extra 10,000 yuan for a 0.6 - second acceleration, a few dozen kilometers of additional driving range, and Tesla's increasingly fading brand halo? The market's reaction will be the most real test of Tesla's brand appeal, core product competitiveness, and the success or failure of its strategic adjustment. Tesla is standing at a critical crossroads, and every choice it makes will profoundly affect its future course. This seemingly minor price adjustment may be the first ripple on the water when this giant ship changes direction.
This article is from the WeChat official account “Cheyun” (ID: cheyunwang), author: Miao Zheng. Republished by 36Kr with permission.