• Tesla has been making price cuts over the past few weeks and months
• There is a “price war” on the electric car market
• NIO’s CFO Steven Feng is critical of the price war
Tesla’s pricing policy
In the recent past, Tesla has often had price reductions. The US company already reduced its prices for new cars by up to 20 percent in January of this year. This made the vehicles more eligible for tax credits in the United States, making them significantly more affordable for customers. For example, buyers who bought their Tesla Model X Plaid at the end of 2022 paid a whopping $ 29,000 “too much”. With the latest price reductions in March 2023, demand should be increased again. Dan Ives, managing director of equities at Wedbush Securities, told CNBC via email that the company’s move is about Elon Musk “The price cuts that Tesla has already made around the world have boosted demand by 30%, and this latest price cut is another smart move.” Musk himself also explained at the recent investor day that the desire to own a Tesla is “indistinguishable from infinity” and that demand will go “crazy” if the company makes its cars more affordable.
Impact on the sector: price war
However, Tesla’s aggressive pricing policy has had a significant impact on the electric car-Market. With the falling Tesla prices, the competition in particular is coming under increasing pressure, which has led to a real price war. After Tesla, other manufacturers also lowered their prices. The Chinese electric car manufacturer Xpeng has now reduced the price of its popular P7 sedan by up to 13 percent, as reported by EFahrer. And the US automaker Ford Motors is also following suit with price cuts. The four-wheel drive version of the “California Route 1” with an extended-range battery now costs almost $5,600 less than before. The Mach-E GT Extended Range even goes down almost 6,000 US dollars. After VW initially did not want to get involved in a price war with the competition, as it was said at least a few weeks ago, prices have recently been reduced here as well. As Business Insider reports, citing the Handelsblatt, VW is expected to announce a lower price for the German automaker’s second cheapest electric car, the VW ID 3, in April. And it shouldn’t stop there. Stefan Bratzel, Director of the Center of Automotive Management, explains to the Handelsblatt that the price reductions among German car manufacturers should continue in the future. Tesla has caused a shock wave in the auto industry and German car companies must either reduce their costs or lower their margin expectations in order to remain competitive.
The China Association of Automobile Manufacturers (CAAM) also said in a statement that new automobile sales promotions and price cuts since March this year are raising concerns, according to IT-Times. The CAAM urged automakers and local governments to end the price war as it does not represent a long-term solution and the auto market should return to normal order as soon as possible.
This is what NIO’s CFO says about the situation on the market
Most recently, Chief Financial Officer Steven Feng from Tesla competitor NIO was critical of the current price war on the market. According to Feng, the price cuts are an indication that there are too many automakers in China, he told Bloomberg. “We expect the industry to undergo deep consolidation. It’s almost a consensus that there are too many automakers in China now, but we have no plans to buy anyone,” Feng said.
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