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The price war is declared on the electric car market. A few weeks after the drastic cuts announced by Tesla, Ford in turn lowered its prices on the American market.
The most expensive version of Ford’s flagship Mustang Mach 3 has melted down nearly $6,000. This SUV now costs around 60,000 euros. It’s still three times more expensive than the average American car, and therefore unaffordable for the majority of potential customers. But the downward movement initiated by Elon Musk is indeed spreading around the world and could shake up the entire industry. Very good news for buyers, because electric vehicles are still much more expensive than gasoline cars. They have also increased significantly over the past two years. Manufacturers have raised their prices to contain the surge in battery prices. It represents 40% of the total cost of a vehicle.
Why drop prices by 20% like Tesla did?
First to adapt to the decline in purchasing power. With the gloomy economic climate in the rich countries, and the sharp rise in American and European interest rates, the world’s leading manufacturer of electric cars fears above all the slowdown in demand. For Teslait also makes many of these models eligible for the purchase bonus offered by the Biden administration, making them even more affordable.
European manufacturers do not share this analysis at all. For the boss of Renault Luca di Meo, as for that of BMW, there is no reason to lower prices when demand continues to exceed supply. This is what we saw last year: despite inflation reducing household purchasing power, sales of electric vehicles jumped in Europe and the United States, and all manufacturers benefited.
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In the Chinese market, Tesla sales fell at the end of the year, in favor of the national champion BYD
The world number two in electric cars has made dazzling progress. At home, he sold twice as many cars as Tesla. In its wake are crowded other hyper-competitive local manufacturers: Li Auto, Nio and Xpeng have tripled or quadrupled their sales in two years. Elon Musk takes these Chinese competitors very seriously, because China is the world’s largest electric car market, and because these agile rivals are in the process of landing on the European market. He had to regain control to keep his crown as number one in the electric vehicle. In January, its Chinese sales rebounded, those of Chinese thumbs are not left out, because they too have lowered their prices.
Could some brands succumb to this price war?
This is what investors anticipate. They have been betting on the explosion of the e-vehicle bubble for several months, just as the e-commerce bubble burst twenty years ago, to the benefit of Amazon. Tesla, which launched the offensive, does not have too much to worry about. Its margins – over $15,000 on a vehicle – are the envy of competitors. That’s three times better than BYD, four times better than Japan’s Toyota and five times Ford’s margin. European manufacturers, anxious to preserve their margins, do not plan to enter this race for price as asserted by the bosses of Renault and BMW. We’ll see how long they can withstand this ground swell.
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