Tesla’s recent move to slash prices on its Model 3 and Model Y by thousands of dollars has been called the start of an electric vehicle price war. But it’s not yet a war every car company is racing to join quite yet.
As carmakers push to electrify their fleets and catch up to Tesla’s lead in the market, they may now also have to compete for buyers with heavy discounts. Ford announced Monday that it, too, will cut prices on the electric Mustang Mach-E by an average of around $4,500.
A few days later, and Ford may prove to be an outlier here. The Verge reached out to several automakers with EV-heavy current lineups or upcoming electric products to ask if they, too, were mulling discounts. So far, two of the German luxury automakers say they’re holding firm on prices, as is one of the burgeoning South Korean leaders in the space.
Officials at BMW, Mercedes-Benz, and Hyundai all said their companies have no plans at present to cut prices.
“We have no plans to revise our current pricing strategy, which reflects the premium and comprehensive customer experience expected from Mercedes-Benz,” spokesperson Robert Moran said in an email.
Hyundai spokesperson Miles Johnson offered similar sentiments. “Hyundai has not taken any specific actions in response to competitor pricing changes, but we constantly evaluate the entire marketplace to ensure our vehicles are priced competitively,” he said. “Our current EVs including Kona, Ioniq 5 and the recently revealed Ioniq 6 offer consumers advanced technology and features at an attractive price point.”
Additionally, “From the BMW brand side, I can tell you that there are no plans to reduce pricing for our electric vehicles,” a spokesperson for the Bavarian automaker said.
Officials from General Motors, Polestar, and Kia, all of which have several new EVs in the pipeline, did not immediately respond to a request for comment.
GM CEO Mary Barra expressed reluctance to move on EV prices right now in a Q4 earnings call Tuesday.
“When we look at our strong product portfolio and the interest that we have at the prices that we’ve already announced, we feel that we’re well positioned,” Barra said. “[Going into] the first month of the year, we’ve seen a very strong customer interest in our products… we think, right now, we’re priced where we need to be.”
Wall Street analysts aren’t so sure that GM will be able to hold firm on prices, with Wells Fargo releasing a note that says it expects the automaker to “capitulate on pricing” as a result of competitive pressure.
Earlier this week, Volkswagen CEO Oliver Blume told the Frankfurter Allgemeine Sonntagszeitung newspaper that his brands — including Audi, Porsche, and others — had no plans to reduce prices.
“We have a clear pricing strategy and are focusing on reliability. We trust in the strength of our products and brands,” Blume told the newspaper, adding that the VW focus was on “profitable growth” with EVs.
That’s probably where Tesla can hit its legacy competition the hardest. Though Tesla just posted yet another profitable Q4 and yearly result, it has been dogged with questions of weakening demand in the US and China as its lineup ages and more competitors enter the space. Its profit margins are also higher than many legacy automakers.
Simply put, Tesla can afford to make this move with other car companies still scrambling to get EVs on the road even if they aren’t yet profitable. Other automakers can cut EV prices, but given their high production costs, that means a loss for the bottom line. Marin Gjaja, chief customer officer of Ford’s electric vehicle business, even admitted yesterday that not all Mustang Mach-E models will be profitable at certain trim levels after these discounts.
“In this EV arms race, Tesla is uniquely positioned around scale, brand, battery technology, and the Musk DNA while others are aggressively going after market share in this all-out Game of Thrones battle,” said analyst Dan Ives of Wedbush Securities, a Tesla bull but also an occasional Elon Musk critic.
Ives added, “There is a window of opportunity to gain share in the burgeoning EV market in our opinion and 2023 is a pivotal year that will establish the winners and losers in this EV landscape with Tesla high on top of the mountain.”
Ives said GM has an advantage here, having built out the Ultium EV platform that will underpin scores of new EVs, from upscale Cadillacs to affordable pickup trucks. But for the traditional automakers, the battle moving forward will mean striking a balance between profits and achieving sales volume with EVs, Ives said.
Additionally, the revised EV tax incentives under the Biden administration’s Inflation Reduction Act have thrown the market into something of a tizzy. Not all automakers qualify for tax credits since their EVs aren’t built in North America — a major loss for Hyundai and Kia, for example, which do not produce EVs here. Moreover, long term, it’s unclear how EVs with batteries not sourced in America will fare under the new rules.
If you’re a prospective EV buyer this year, you may be the real winner as more cars enter the market and compete on price — provided automakers can get past the supply issues that dogged them through much of 2022.