Tesla enjoyed several years of success as the most well-known electric vehicle (EV) manufacturer, dominating the global market. However, with governments worldwide pursuing a green transition and looking to eventually phase out the sale of internal combustion engine (ICE) vehicles, many other automakers have developed highly competitive EVs in recent years. While Tesla is still well regarded for its EV offerings, many other startups and long-established automakers are offering cheaper EV models with similar capabilities, which is driving down Tesla sales. This has led the automaker to slash its prices in response to market pressures.
This month, Tesla cut the prices for its Model Y EVs across several European countries, including Germany, France, Norway and the Netherlands, following a price reduction a week earlier on its Model 3 and Model Y cars in China. In Germany, the price of the Model Y rear-wheel drive model has fallen by around 4.2 percent to $46,760. The price of the long-range version of the car has dropped by around 8.1 percent to $54,297. In France, the Model Y price has fallen by around 6.7 percent, in the Netherlands by up to 7.7 percent and in Norway by between 5.6 percent and 7.1 percent.
Tesla's decision to reduce the price of several of its EV models in the Chinese market was taken mainly to compete with the rising availability of low-cost Chinese EVs, particularly from the automaker BYD. It reduced the price of its Model 3 by 6 percent and its Model Y by 11 percent, compared to December 2022. BYD is offering a wide range of EV models, some that are within the same price range as Tesla models and some that fall far below. To increase its market share, BYD has launched several sales promotions over the last year, reducing the price of some models by as much as 10 to 17 percent.
This has helped it compete with Tesla, the EV superstar, particularly in the Chinese market. China continues to be the world’s biggest EV market, with sales increasing by around 82 percent in 2022, contributing almost 60 percent of global EV sales. And China is also rapidly expanding its EV manufacturing capacity, with several Chinese companies stepping into the world of automaking.
In addition to dramatically undercutting Tesla’s EV prices, many Chinese automakers are also offering highly competitive technologies in their EV models. Several companies are now selling cars that have advanced technologies that are not yet available in Tesla models in China, such as in-car projectors, refrigerators and driver-assist. This shows the battle is no longer centred solely on price and range. This shift in the automaker’s approach to EV offerings highlights some of the key differences between the Chinese and U.S./European EV markets, suggesting there is not a one-size-fits-all approach to EV sales.
Li Yi, chairman and CEO of Appotronics, a Shenzhen-based laser display company, stated, “In China, I think it’s more entertain[ment], more gadgets, people really want to buy something with the most advanced tech specs,” adding that in Europe, people focus more on functionality. He suggested that automakers in the U.S. “want something completely different than Chinese carmakers.” He believes that Chinese consumers will pay a premium for advanced technologies in cars, while U.S. automakers have focused instead on driving down costs.
Thanks to its strong mineral production and manufacturing sectors, China can produce low-cost EV batteries and other components, that allow for the production of lower-cost EVs. They can then add additional technologies to the vehicles for the high-end market, offering consumers highly competitive models.
At the same time Tesla is cutting the price of its EVs worldwide to compete with Chinese and other automakers, it is battling supply chain disruptions and rising costs. This month, Tesla CEO Elon Musk announced the company would be suspending much of the production at its German factory from 29th January to 11th February due to a lack of components, as shipping routes had to be adjusted because of attacks on vessels in the Red Sea. Meanwhile, the company has faced rising costs associated with the accelerated production of its stainless steel panelled Cybertruck electric pickup truck.
Even as Tesla faces challenges, it must keep prices low to remain competitive. In 2023, BYD overtook Tesla to become the world’s biggest EV maker. Meanwhile, in Germany, Volkswagen’s market share rose above that of Tesla, with 13.5 percent and 12.1 percent respectively. This has demonstrated to consumers that Tesla is no longer the dominant force in the global EV market. As automakers increase their EV offerings, becoming more competitive in terms of price, range and technologies, Tesla will likely have to continue offering competitive pricing schemes to stay in the game.
By Felicity Bradstock for Oilprice.com
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