Photo: Tesla | Edited
When Tesla cut the prices in January, many critics quickly pointed out that this would affect Tesla more than the market. Still, later development showed that Tesla was right, and the ripples of that move caused both new and used EV prices to crash.
Tesla shocked the markets with its price cuts operated in January. Many criticized the move, saying it would affect the company margins and existing Tesla owners because of a drop in value. When the first-quarter results were in, Reuters was so quick to show the price cuts failed that it completely missed the numbers telling sales increased. Still, the sudden change in pricing strategy proved a good move, at least for Tesla. It was a bloodbath for everyone else, though, and the consequences still reverberate throughout the automotive markets.
The most obvious change was that all other carmakers were forced to cut prices. This was brutal, considering that no legacy carmaker was making a profit from selling EVs. Now, the loss accelerated, making it a bad business to produce electric vehicles. While GM decided to build as few EVs as possible to minimize losses, Ford was surprised to see that its electric cars piled up on dealers' lots until they no longer wanted to get new allocations. On the other hand, Volkswagen was forced to slash EV production significantly, blaming "customer reluctance" to buy EVs.
A new report from Cox Automotive's Kelly Blue Book showed that new EV prices were 20% lower in June 2023 compared to last year. The average EV transaction price was $54,528 in June, down from over $66,000 a year ago. The average prices were driven down mainly by Tesla price cuts, but they also reflected inventory increases experienced by some automakers in 2023. This means legacy carmakers were forced to lower prices even more or risk keeping their EVs on the dealers' lots indefinitely.
It wasn't just the EV prices influenced by Tesla's cuts, but the overall luxury segment was also affected. Luxury vehicle prices dropped in June by more than 2% year over year. And although Tesla sales are only a tiny part of the US car market, the price cuts also influenced the overall market. According to Kelly Blue Book, the average price Americans paid for a new vehicle in June 2023 was 1.6% higher than one year ago. This was the smallest year-over-year price increase since the start of the global pandemic.
The used EV market was hit even harder, with Tesla owners bearing the blunt. They saw their cars' value plummeting, making it less compelling to trade in or sell. Companies with large Tesla fleets got on the brink of bankruptcy because they had to raise capital to compensate for the loss of value. And because Tesla's new prices were down, used Teslas also lost their value. According to an iSeeCars study, the used EV prices dropped by 29.5% in June 2023 compared to June 2022. Tesla Model 3 prices crashed by 30.5%, considering that Tesla EVs represent the majority of the used EV market.
The most obvious change was that all other carmakers were forced to cut prices. This was brutal, considering that no legacy carmaker was making a profit from selling EVs. Now, the loss accelerated, making it a bad business to produce electric vehicles. While GM decided to build as few EVs as possible to minimize losses, Ford was surprised to see that its electric cars piled up on dealers' lots until they no longer wanted to get new allocations. On the other hand, Volkswagen was forced to slash EV production significantly, blaming "customer reluctance" to buy EVs.
A new report from Cox Automotive's Kelly Blue Book showed that new EV prices were 20% lower in June 2023 compared to last year. The average EV transaction price was $54,528 in June, down from over $66,000 a year ago. The average prices were driven down mainly by Tesla price cuts, but they also reflected inventory increases experienced by some automakers in 2023. This means legacy carmakers were forced to lower prices even more or risk keeping their EVs on the dealers' lots indefinitely.
It wasn't just the EV prices influenced by Tesla's cuts, but the overall luxury segment was also affected. Luxury vehicle prices dropped in June by more than 2% year over year. And although Tesla sales are only a tiny part of the US car market, the price cuts also influenced the overall market. According to Kelly Blue Book, the average price Americans paid for a new vehicle in June 2023 was 1.6% higher than one year ago. This was the smallest year-over-year price increase since the start of the global pandemic.
The used EV market was hit even harder, with Tesla owners bearing the blunt. They saw their cars' value plummeting, making it less compelling to trade in or sell. Companies with large Tesla fleets got on the brink of bankruptcy because they had to raise capital to compensate for the loss of value. And because Tesla's new prices were down, used Teslas also lost their value. According to an iSeeCars study, the used EV prices dropped by 29.5% in June 2023 compared to June 2022. Tesla Model 3 prices crashed by 30.5%, considering that Tesla EVs represent the majority of the used EV market.
Google News