The EV Price War Hasn’t Started Yet

The EV Price War Hasn't Started Yet

Tesla’s recent move to cut the prices of its Model 3 and Model Y by thousands of dollars has been called the start of an electric vehicle price war. But it’s still not a war that all auto companies are rushing to join.

As automakers push to electrify their fleets and catch up with Tesla’s market lead, they may now also have to compete for deeply discounted buyers. Ford announced Monday that it will also reduce prices for the electric Mustang Mach-E by an average of about $4,500.

A few days later, and Ford may prove to be an outlier here. the edge contacted several automakers with current heavy-duty electric vehicle lineups or upcoming electric products to ask if they, too, were considering discounts. So far, two of Germany’s top luxury carmakers say they are holding their own on prices, as is one of South Korea’s emerging leaders in the space.

the edge contacted several automakers with current heavy-duty electric vehicle lineups or upcoming electric products to ask if they were considering discounts as well

Officials from BMW, Mercedes-Benz and Hyundai said their companies have no plans at this time to cut prices.

“We have no plans to revise our current pricing strategy, which reflects the comprehensive and premium customer experience expected of Mercedes-Benz,” spokesman Robert Moran said in an email.

Hyundai spokesman Miles Johnson expressed similar sentiments. “Hyundai has not taken any specific actions in response to competitive price changes, but we are constantly evaluating the entire market to ensure our vehicles are competitively priced,” he said. “Our current electric vehicles, including the Kona, Ioniq 5 and the recently introduced Ioniq 6, offer consumers advanced technology and features at an attractive price.”

In addition, “from the BMW brand side, I can tell you that there are no plans to reduce the prices of our electric vehicles,” a spokesperson for the Bavarian automaker said.

Officials at General Motors, Polestar and Kia, which have several new electric vehicles in the pipeline, did not immediately respond to a request for comment.

“We have no plans to revise our current pricing strategy”

GM CEO Mary Barra expressed a reluctance to change EV prices at this time in a fourth-quarter earnings call on Tuesday.

“When we look at our strong product portfolio and the interest we have in the prices we already announced, we feel we are well positioned.” bar said. “[Going into] In the first month of the year, we’ve seen a lot of customer interest in our products…we think we’ve got the price we need right now.”

Wall Street analysts aren’t so sure GM can hold its own on pricing, with Wells Fargo. releasing a note which says it expects the automaker to “capitulate on price” as a result of competitive pressure.

Earlier this week, Volkswagen Group CEO Oliver Blume told the Frankfurter Allgemeine Sonntagszeitung Newspaper that its brands, including Audi, Porsche and others, had no plans to cut prices.

“We have a clear pricing strategy and we are focusing on reliability. We are confident in the strength of our products and brands,” Blume told the newspaper, adding that the VW Group’s focus was on “profitable growth” with electric vehicles.

That’s probably where Tesla can hit its legacy competition the hardest. Although Tesla just posted another profitable fourth quarter and full-year result, it has been plagued by questions about weakening demand in the US and China as its lineup ages and more competitors enter the space. Your profit margins are also higher than many legacy automakers.

Simply put, Tesla can afford to make this move with other auto companies that are still struggling to get EVs on the road, even if they aren’t profitable yet. Other automakers may cut prices on EVs, but given their high production costs, that means a loss to the bottom line. Marin Gjaja, director of customer service for Ford’s electric vehicle business, even admitted yesterday that not all Mustang Mach-E models will be profitable on certain trim levels after these discounts.

“Right now, we have the price where we need to be”

“In this EV arms race, Tesla is uniquely positioned around scale, brand, battery technology, and Musk DNA, while others aggressively seek market share in this total. game of Thrones battle,” said Wedbush Securities analyst Dan Ives, a Tesla bull but also an occasional critic of Elon Musk.

Ives added: “In our view, there is a window of opportunity to gain share in the burgeoning EV market and 2023 is a pivotal year that will establish the winners and losers in this EV landscape with Tesla riding high on the mountain. ”.

Ives said GM has an advantage here, having built the Ultium EV platform that will support dozens of new electric vehicles, from luxury Cadillacs to affordable pickup trucks. But for traditional automakers, moving the battle forward will mean balancing profit and building volume with electric vehicles, Ives said.

In addition, revised tax incentives for electric vehicles under the Biden administration’s Inflation Reduction Act have made the market somewhat nervous. Not all automakers qualify for tax credits since their EVs aren’t made in North America, a huge loss for Hyundai and Kia, for example, which don’t make EVs here. Plus, in the long run, it’s unclear how electric vehicles with non-US batteries will fare under the new rules.

If you’re a potential EV buyer this year, you may be the real winner as more cars enter the market and compete on price, provided automakers can overcome the supply woes that dogged them for much of 2022.

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