In early 2023, Tesla caused quite a stir in the electric car sector. In the space of a few hours, the prices of its vehicles dropped sharply around the world. Some models saw impressive price cuts, such as the Model 3, which lost more than €13,000 on its entry-level model. Nevertheless, a number of questions remain. Why is Tesla suddenly starting a price war with other carmakers? How is the competition reacting? And above all, is this sales strategy sustainable in the long term?
Tesla hits hard with its prices
Once again, 2022 was a difficult year for the automotive industry. The number of registrations fell by 7.83% in France and by 2% worldwide. This was the result of the conflict in Ukraine, but also of low household morale following the Covid-19 crisis. To restore momentum, Tesla has decided to launch a price war. The example given above is the most striking. The Tesla Model 3, one of the brand’s greatest successes, saw its price cut by more than €13,000 in just one night. With a list price dropping from €53,000 to €39,990.
This price cut was also applied to the Model Y electric SUV, with a price cut of €9,500 on its Long Range version. The aim of this operation was to revitalise international sales, but also to counter emerging competition offering electric vehicles that are increasingly accessible to consumers. The result was a success for the Californian brand, which saw its order book fill up instantly, all with the kind of publicity stunt that Tesla is so good at!
The rise of Chinese brands
Who would have thought that Chinese cars would have established such a strong presence in Europe so quickly?
Let’s take the example of MG, which used to be a British brand specialising in the production of small sports cars. Bought by the SAIC group after it went bankrupt in 2006, its growth has been spectacular in a short space of time. In just 1 year, 13,170 units were sold in France. The Anglo-Chinese manufacturer is now aiming for 20,000 sales in France and a 1% market share by the end of 2023. This is entirely achievable, given the rapid expansion of its dealer network. MG models are offered at very competitive prices and feature good performance levels, largely on a par with European vehicles.
Another fast-growing Chinese brand is BYD. BYD is on its way to become the world’s number 1 electric car manufacturer. It offers a very complete range (saloons and SUVs) and has recently counter-attacked Tesla by lowering its prices, which are already very competitive. In doing so, it has become more aggressive than ever in the pricing of its vehicles.
There are also other Chinese entities such as Link & Co, Aiways, and the new Galaxy brand, owned by the Geely group. In other words, carmakers are stepping up their guard and redoubling their efforts to make their new models as attractive as possible.
Some carmakers are taking part in the price war…
Faced with the rise of the Chinese carmakers, the historic brands are under severe pressure. To counter their rock-bottom prices, some have decided to adopt the same strategy as Tesla. Take Nissan, for example. Its electric SUV, the Ariya, which recently went on sale, saw its prices drop by more than €8,000 in China. Its historic rival Toyota did the same, with lower prices for its BZ4X model. These new prices should soon be reflected in French prices.
Surprisingly, even Ford, which was initially reluctant, followed suit with its sporty SUV, the Mustang Mach-E. With production volumes increasing every year, carmakers have more room to negotiate than in the past, making electric vehicles more accessible and building public enthusiasm for them.
Others reject the idea
Volkswagen and Peugeot recently pointed out to the specialist press the limits of the price war. The residual value of vehicles, in particular, could be severely impacted. As a result, they have chosen to stay away from this strategy. Other brands with a more upmarket positioning, such as Mercedes-Benz, BMW and Land Rover, simply rejected the idea from the beginning. As their products are positioned in the Premium segment, it is inconceivable that they would sell off vehicles with high added value. It is up to each manufacturer to be as competitive as possible in terms of pricing, and whether or not to enter into a price war.
The price war: opportunities to be taken quickly!
So there are some very good deals to grab at the moment! Especially as the number of carmakers involved in the price war has been rising steadily over the last few months. However, if you’re interested in buying an electric car at a good price, we’d advise you not to wait too long. It’s hard to say whether this is just a trend or a long-term strategy. Given the high level of inflation, it is possible that vehicle prices will start to rise again in the coming months.
The Dacia Spring and MG4 offer unbeatable prices for their respective segments. Currently, the Chinese compact sedan has a base price of €22,990, while its direct rival, the Renault Megane E-Tech, will set you back a further €9,000. One thing’s for sure, the price war is good for the electric transition and for the renewal of the French car fleet!
