Tesla launches price war for electric cars

Tesla is lowering the prices of its best-selling Model Y and Model 3 in all major markets. Also in Switzerland, electric cars cost significantly less since the end of last week. The price of the mid-range SUV Model Y Long Range has been reduced by CHF 10,000 to CHF 54,990. The base Model Y is now available for CHF 46,990, which is CHF 8,000 less than last time.

The Model 3 in the basic version with the small battery now costs 44,990 instead of 45,990 francs. But that is still significantly more than the previous low price, which was just under 40,000 francs.

In the aftermath of the corona pandemic, the global chip and logistics crisis, and massive inflation, Tesla, like other automakers, had raised prices massively. Now the price spiral seems to be going the other way for the first time and heading towards pre-corona prices.

In the US, prices fall by 6 to 20 percent. This is according to a calculation by the Reuters news agency. For a US customer who now pays the lower price for a Model Y and still benefits from the subsidies that went into effect in the US this month, the discount adds up to 31 percent.

In Germany, depending on configuration, customers pay between one and 17 percent less for the Model 3 sedan and the best-selling Tesla Model Y.

Price war electric vehicles

In the past week and October, Tesla had already cut prices in China, South Korea, Japan, Singapore and Australia. This, coupled with recent price cuts in the US and Europe, marks a reversal of the company’s strategy of raising prices when demand is high. Tesla now apparently wants to maintain its market share with lower prices, as competition between electric car manufacturers has increased enormously in 2022.

Large numbers of new electric cars will also come onto the market in 2023, although many rivals still have limited production capacity. Tesla therefore tries to win over those customers who did not want to wait for their electric car, sometimes with huge price reductions.

For Tesla, this is probably the beginning of the transition to a conventional manufacturer that has to provide noticeable discounts in order to survive in the increasingly fierce competition. Skeptical analysts such as Bernstein expert Toni Sacconaghi estimate that Tesla could face problems with demand and utilization of its plants with tougher competition from China.

The price reductions are intended to stimulate demand and increase pressure on competitors to also offer cheaper prices. That could turn into a discount battle. In addition to Tesla, for example, Mercedes has already drastically reduced the price of its luxury sedan EQS in China by as much as CHF 30,000.

The price war for electric vehicles is already underway and could intensify as the year progresses. Shorter delivery times, increased production and increasing competition are likely to lead to higher discounts from other manufacturers in the foreseeable future. With falling raw material and logistics costs, manufacturers also have room for price reductions.

Chinese are leaving Tesla

Tesla has been under pressure recently, especially in China, because its Chinese rival BYD (Build Your Dreams) grew significantly faster.

BYD is also hot on Tesla’s heels globally and could replace the previous number one as the best-selling e-car brand as early as 2023.

The largest market for tech billionaire Elon Musk’s group is the US, followed by China. In the fourth quarter of 2022, Tesla had fallen short of analyst expectations for the number of vehicles delivered. The recent unusually high inventories for Tesla have now led to a massive price correction.

What future customers will love may not be fun for previous Tesla owners: the sometimes drastic price cuts aimed at getting as many cars on the market as possible will likely have a negative effect on resale value.

With material from the Reuters news agency

(oli)