Tesla's Aggressive Price Cuts Have Squeezed Legacy Carmakers in World's Biggest EV Market

Tesla's aggressive price cuts have squeezed traditional carmakers in the biggest EV market 6 photos
Photo: Tesla | Edited
Tesla's Discount Promo Offer in ChinaModel Y in Panziga, the place Now Known as Tesla VillageTesla price cuts are a punch in the gut to all other players in the EV arenaTesla price cuts are a punch in the gut to all other players in the EV arenaTesla price cuts are a punch in the gut to all other players in the EV arena
Tesla solved its low-demand problem in China with aggressive price cuts that essentially passed the problem to its rivals. Traditional carmakers have refused to follow suit immediately, but are now forced to slash prices after their sales collapsed.
Tesla started the year with massive price cuts in China, the world's biggest EV market, in a bid to solve what appeared to be a demand problem. After an initial shock, the market settled, with few other carmakers willing to follow in Tesla's steps. The price cuts helped the American EV maker energize sales, even though they caused an uproar among its customers. People were furious that they had to pay more for the same cars just weeks before Tesla adjusted the prices.

Tesla's move has pressured smaller car companies like XPeng and NIO, already struggling to reach profitability. Bigger players like BYD also saw their sales plummet, but remained determined to avoid a price war. Traditional carmakers were the most bullish, saying that they had no intention of lowering prices, relying on their strong value proposition. It took them around two months for this value to dilute enough to also consider price cuts.

Toyota was among the first to announce a massive price drop for the bZ4X in February. The electric crossover was far from being a sales champion, and it is unlikely that the $4,300 price cut would make much of a difference. Other carmakers followed shortly as the market conditions worsened in China. The move was accelerated after China phased out nationwide subsidies for electric vehicles, and sales stalled.

According to Wall Street Journal, Ford, BMW, and Volkswagen now offer deep discounts and promotions on their electric vehicles. General Motors is even slashing the prices of their gas-powered vehicles, acknowledging the market shift toward electric vehicles. Sales of combustion-engine vehicles have steadily declined in China, with homegrown EV makers dominating the car market.

The report reveals that Ford has cut $6,000 off the Mustang Mach-E price, with the standard-battery version selling as low as $31,000. The move came after Ford only sold 84 cars in February, down from around 1,500 in December. Ford has commented on the news, saying it's a stock clearance that will last through April. Volkswagen is applying a similar discount on the ID. range of electric vehicles while cutting prices of its gas-powered models by $2,200-$7,300.

The problems for legacy carmakers are exacerbated by the tighter emissions standards due to take effect in July. Wall Street Journal reports that car dealers must clear out around 500,000 vehicles in their inventories before the new regulations make them obsolete. They will most probably do that by lowering prices even more. At these rates, carmakers and dealerships risk collapsing, some analysts believe.
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About the author: Cristian Agatie
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After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
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