Analysis of the Impact of Tesla China's 5-Year 0% Interest Program on the New Energy Vehicle Industry's Price War and Gross Margin

Based on the collected information, I will systematically analyze the impact of Tesla China’s launch of the 5-year 0% interest car purchase program on the new energy vehicle industry’s price war and gross margin.

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On January 6, 2026, Tesla China officially launched a 5-year 0% interest financial program, covering three models: Model 3, Model Y, and Model Y L [1][2]. The specific program details are as follows:

Model	Down Payment	Monthly Payment	Subsidy-Adjusted Starting Price
Model 3/Y	Starting from RMB 79,900	Starting from RMB 1,918	RMB 227,500
Model Y L	Starting from RMB 99,900	Starting from RMB 2,947	-

In addition, Tesla also offers a stacked RMB 8,000 insurance subsidy and exclusive charging benefits [1].

The deep-seated reason for Tesla’s launch of this aggressive financial program lies in its continued decline in global market performance [2]:

• Global Sales
  : Delivered 1.636 million units in 2025, an 8.6% year-on-year decline, marking the first annual sales drop since large-scale production began
• European Market
  : New car registrations plummeted 39% in the first 11 months, with about half of its market share in Germany and the UK seized by local brands
• Chinese Market
  : Delivered approximately 618,000 units at the retail end, a year-on-year decline of about 6%

Facing cutthroat competition from rivals such as BYD and Li Auto, Tesla’s technological halo effect is weakening [2].

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The launch of Tesla’s 5-year 0% interest program marks a new phase of competition in the new energy vehicle industry [1][3]:

:

Traditional Price Cuts → Cash Subsidies → 0%/Low-Interest Financial Programs → Combined Discounts

: According to incomplete statistics, since January 2025, more than 30 automakers have adopted various forms of price reduction measures, including [1][3]:

• Spring Festival gift packages, subsidy guarantees
• Flat-rate direct price cuts
• 3-year/5-year 0% interest or even 0 down payment

:

• XPeng Motors
  : Launched the industry’s first “0 down payment + 5-year 0% interest” car purchase discount
• GAC Toyota
  : Cut prices across the board for SUV models such as Frontlander and Wildlander
• Li Auto, HarmonyOS Intelligent Mobility
  : Seized market share through cash discounts and trade-in subsidies

Tesla’s financial program strategy has created a significant “catfish effect” [1][3]:

Impact Dimension	Specific Performance
Escalated Competition Intensity	The price war evolves into a combination of finance war and service war
Changed Consumer Expectations	The “buy when prices rise, hold off when prices fall” mentality intensifies, strengthening the wait-and-see mood among consumers holding cash
Diluted Brand Premium	Frequent promotions lead to a decline in perceived brand value
Pressure on Small and Medium-Sized Brands	Automakers with insufficient financial strength struggle to keep up

The continuation of price wars and finance wars will accelerate industry reshuffling [3][4]:

“It is very likely that a number of brands will exit the market or be acquired in 2026, market concentration will further increase, and the market share of the top 3-5 enterprises may exceed 70%.” [1]

:

• Brands such as Jiyue and Hycan already faced crises in 2024
• Neta and HiPhi ran into trouble at the start of 2025
• Industry insiders predict that one-third of 4S stores may face closure in the next few years

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The price war has had a significant impact on the profitability of automakers [4][5][6]:

Enterprise	Gross Margin of Automotive Business	Trend Change
BYD	21.02%	Increased by 0.63 percentage points year-on-year, a counter-cyclical rise
Li Auto	19.8%	Relatively stable, maintaining a healthy level
Tesla	17.9%	Continued decline from 25.6% in 2022
NIO	13.1%	Under obvious pressure
XPeng Motors	8.6%	At a relatively low level
GAC Group	7%	Overall gross margin is relatively low

Tesla’s gross margin has shown a continuous downward trend [2][5]:

Time Node	Gross Margin	Delivery Volume	Profit
2022	25.6%	1.31 million units	USD 12.5 billion
2024	17.8%	1.78 million units	USD 7.1 billion

: While delivery volume increased by 35.9%, profit decreased by 43%, reflecting the diminishing marginal effect of the “volume at the expense of price” strategy [5].

From a financial perspective, the 5-year 0% interest program is not a “free lunch” for automakers [2][6]:

:

• Assuming a car price of RMB 250,000, with 70% financing (RMB 175,000)
• Annualized capital cost calculated at 5%
• Tesla needs to advance approximately
  RMB 1,000
  in interest per vehicle per month
• Accumulated interest cost over 5 years is approximately
  RMB 60,000 per vehicle

:

1. Capital Cost: Bear the interest of consumers’ loans
2. Liquidity Pressure: Extended accounts receivable cycle
3. Used Car Residual Value Risk: The residual value of the vehicle after 5 years may be lower than the outstanding loan balance

The price war has had a systemic impact on the profits of the entire automotive industry [5][6]:

Indicator	2023	2024	Change
Industry Average Profit Margin	5.0%	4.3%	-0.7 pct
Industry Profit Margin in December	-	4.1%	Continuous decline

: The median gross margin of the automotive industry is only 15%-20%. Against the backdrop of rigid battery costs, the mid-to-low-end market faces greater pressure [6].

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Against the backdrop of widespread industry pressure, BYD has demonstrated strong risk resistance capabilities [4][5]:

:

• Achieved operating revenue of RMB 777.102 billion in 2024, a year-on-year increase of 29.02%
• Automotive business revenue reached RMB 617.382 billion, accounting for 79.45% of total revenue
• Net profit attributable to parent shareholders was RMB 40.254 billion, a year-on-year increase of 34%
• Gross margin of automotive business was 21.94%, far exceeding Tesla’s 17.9%

:

• Sales volume reached 4.272 million units in 2024, a year-on-year increase of 41.26%
• Reclaimed the title of global new energy vehicle sales champion
• Overseas market revenue reached RMB 221.9 billion, accounting for nearly 30% of total revenue
• The gross margin per unit of overseas products is approximately 28.87%

BYD’s success provides important implications for the industry [5]:

1. Technological Cost Reduction
   : Dilute costs through vertical integration and large-scale production
2. Product Matrix
   : Covers the full price range from RMB 78,800 to RMB 249,800
3. Intelligent Driving Equality
   : Achieved standard high-speed NOA (Navigate on Autopilot) for all models in 2025
4. Overseas Breakthrough
   : Factories in Thailand and Hungary support global layout

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:

• Reduced car purchase threshold for consumers, stimulating short-term demand
• Tesla’s brand effect combined with financial discounts, increasing market activity

:

• Industry profit margin continues to be under pressure, possibly falling below 4%
• Survival space for small and medium-sized brands is further compressed
• Consumers’ “buy when prices rise, hold off when prices fall” mentality intensifies

:

“When financial discounts become an industry standard, the marginal effect of price wars will become weaker and weaker, and consumers will pay more attention to technological strength and service experience.” [1]

:

• Technological Differentiation
  : Intelligent driving, battery technology, battery swapping systems
• Service Ecosystem
  : Charging network, user operation, OTA upgrades
• Globalization Capability
  : Localization of overseas factories, supply chain layout

:

• Avoid falling into endless price involution
• Increase R&D investment to build a technological moat
• Improve capital management capabilities to cope with the consumption of finance wars

:

• Treat financial discounts rationally and clarify hidden costs
• Focus on long-term usage costs rather than just monthly payments
• Avoid missing car purchase opportunities due to the “buy when prices rise, hold off when prices fall” mentality

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Tesla China’s launch of the 5-year 0% interest car purchase program is a strategic breakthrough move against the backdrop of global sales decline and intensified competition, which has a profound impact on the new energy vehicle industry:

1. Price War Escalation
   : Pushes the industry from pure price competition to comprehensive competition in finance and services
2. Gross Margin Under Pressure
   : Tesla’s own gross margin has dropped from 25.6% to 17.9%, and the industry average profit margin has fallen below 5%
3. Restructuring of the Landscape
   : Small and medium-sized brands face elimination pressure, and industry concentration will further increase
4. Model Innovation
   : Automotive finance has transformed from a profit point to a competitive tool, driving industry transformation

For investors, it is necessary to focus on leading enterprises with scale advantages and technological barriers; for consumers, it is necessary to comprehensively evaluate the hidden costs of financial programs and make rational decisions.

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[1] NetEase News - “39% Plunge in Europe! Tesla China Launches 5-Year 0% Interest Program for 3 Models! The Ceiling of Automakers’ Involution Has Arrived” (https://www.163.com/dy/article/KIK1K2350539QCIH.html)
[2] Eastmoney Wealth Account - “5-Year 0% Interest! Launches the ‘King Bomb’ of Car Purchase, Tesla is Really Anxious This Time” (https://caifuhao.eastmoney.com/news/20260106150823505121760)
[3] Wenxuan Finance - “New Energy Vehicle ‘Price War’ Restarts, Industry Competition Will Be Fiercer in 2025” (https://wenxuan.news/qiche/14378.html)
[4] Securities Times - “Earning RMB 110 Million Daily, Revenue Surpasses Tesla: BYD’s Trio of Technology, Market, and Ambition” (https://stcn.com/article/detail/1609761.html)
[5] Autohome Chejiahao - “Terrifying on Second Thought! Gross Margin Surpasses Tesla, BYD Still Has Large ‘Price Reduction Space’” (https://chejiahao.m.autohome.com.cn/info/19673144)
[6] CNfol.com - “A New Round of Automobile Price War Starts at the Beginning of 2025” (http://mp.cnfol.com/55379/article/1741311463-141692267.html)
[7] 21st Century Business Herald - “2025, New Energy Automakers Fight to the Bitter End” (http://www.21jingji.com/article/20250113/herald/8c082a9cb4264b0e1501228353dff246.html)