The EV world is competitive, and Tesla is now fighting for a spot at the top in an industry it practically created. The company’s solution? Cutting prices. But in Tesla’s attempt to remain on top, an EV price war has begun, and while it is more than capable of withstanding what is to come, not every company is willing or able to participate.
The Beginning of the EV Price War
Tesla is not solely responsible for the EV price war. Instead, the industry has been at a tipping point, with various automakers entering the EV market and competition for materials and customers ramping up. However, Tesla’s move to drop prices is an ignition point, and it reflects a major shift in the market.
According to Jessica Caldwell, Edmunds Executive Director of Insights, “In 2023 a wave of new EV options will enter the market, but given that production will be limited for most manufacturers, Tesla is positioning itself to scoop up consumers unwilling to wait or who may be on the fence about EV technology by enticing them with one thing all buyers respond to — a deal.”
The price cuts are made even more enticing by the fact that it places a few of the models into the range to receive further discounts because of federal EV tax credits. In a slowing economy where people might be hesitant to choose an electric vehicle, the reduced price tag might be all it takes to make it happen.
Who Does the Price War Effect?
In the case of Tesla directly, price cuts mean the company is cutting costs at every possible angle. That trickles down, impacting suppliers. It is something happening in the US and China, with one supplier reporting that Tesla brought up the goal of reducing costs by 10% due to the growing competition.
At the same time, other car companies are feeling the pressure to follow suit. One example is Ford, which slashed the price of its Mustang Mach-E electric SUV because of the emerging EV price war.
Ford wrote about the matter, saying, “With its new EV supply chain coming online, Ford is significantly increasing production of the Mustang Mach-E this year to help reduce customer wait times and to take advantage of streamlined costs to reduce prices across the board, making Mustang Mach-E even more accessible to customers and keeping it competitive in the marketplace.”
Electric truck maker Rivian has also been caught up in the EV price war, which led to the company laying off 6% of its workforce in an effort to conserve cash. Why? Because as the fear of dropping prices looms, companies have to prepare for forced cuts of their own, which is particularly damaging to startups and smaller companies, comparatively speaking.
Not Everyone Is Joining the EV Price War
There are those who argue that there is not a real price war going on, at least not yet. The reason is that there are still many major companies that have not budged on their prices. That includes big-time players like BMW, Mercedes-Benz, and Hyundai. While that could change, their strategy remains rooted in place for the moment.