7:09 am, January 17, 2023
Tesla has sparked an electric car price war with its move to slash new prices last week, say experts.
Manufacturers will be forced to follow suit or offer improved incentives to buyers if they’re to capture sales following Tesla’s shock move.
What Car? editorial director Jim Holder said rivals will ‘have no choice but to respond’ after Tesla cut the price of its Model 3 and Y overnight on Thursday (Jan 12).
The Model 3 entry spec now has a starting price £5,500 lower after prices were cut, while the Model Y Performance is now a whopping £7,000 cheaper.
Holder said: ‘The days of pumped up waiting lists are diminishing. Our data shows customer demand is down, especially for EVs, as a result of the cost-of-living crisis and other negative headlines, and of course supply is opening up as chip shortages lessen.
‘At the same time emissions targets mean that manufacturers have to sell EVs in order to balance their books.
‘The price increases of recent years and months have been possible as everyone was doing the same thing – but Tesla’s move bursts that bubble.
‘Its price drop is so significant it makes almost every other rival look expensive and leaves them with no option but to respond if they want to remain relevant in an increasingly competitive market.’
Auto Express editor in chief Steve Fowler told Car Dealer: ‘As car makers find that supply catches up with – and overtakes – demand, I’d hope to see a reduction of prices elsewhere.
‘We’re already seeing incentives increase and I’d like to see that filter through to a greater transparency on list prices – especially with the effect that will have on taxation.’
Research by Electrifying.com found that the cost of a Tesla Model Y on a PCP was now cheaper than an equivalent VW Tiguan diesel.
Comparing PCP prices to other electric cars also revealed how expensive rivals look.
Editor Tom Barnard compared cars with a £6,000 deposit over three years and 10,000 miles.
- Tesla Model Y – £466 per month
- Tesla Model 3 – £522 per month
- Skoda Enyaq 80 – £587
- Polestar 2 – £625
- Kia EV6 – £710
- Ford Mach-E – £745
He said: ‘Tesla was seen as a genuine alternative to a prestige brand, but that seems to be changing – both in the eyes of consumers, but also Tesla itself.
‘Production and therefore supply have ramped up, and the company has discovered that they have run out of buyers who are willing to pay a premium for the product and ownership experience. Therefore, prices have to come down to stimulate demand.
‘This will bring Tesla products into competition with mainstream brands. We can already see that the monthly finance payments on a Model Y are substantially lower than the electric competition and even undercut diesel rivals.’
Barnard said Tesla’s move will cause ‘head scratching’ in other car manufacturer’s marketing departments.
‘If these Tesla rivals face a flurry of cancelled orders and suddenly have a situation where they have stock rather than waiting lists, there will be little choice but to cut production or prices,’ he added.
‘But I suspect it is more likely rivals will look at other ways to make ownership more accessible and attractive, either with incentives or innovative new product. They will be looking closely for Tesla’s weak points and aiming squarely at them.
‘The most obvious is the product itself – although it’s still highly competitive, electric car owners like the excitement of new things, and Tesla’s product is looking a little too familiar.’
Barnard also suggested that Tesla’s move could be an attempt to shift old stock ahead of a refreshed model.
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