When Tesla slashed the price of volume vehicles like Model Y by as much as $13,000, many assumed this was both a brilliant strategic move and a shot across the bow of competitors forcing them to slash prices as well. At the time, I called the Tesla price cuts strictly an effort to match demand with their dramatically increasing manufacturing capacity.
Ford swiftly responded to the Tesla price cut by reducing prices on its Mustang Mach-E by up to $5,900. Tesla fans crowed that this was a sign that more price cutting from competitors was imminent, with Tesla being in the best position to win the EV pricing game.
However, as the Observer noted recently, many EV competitors made decisions to lower prices for “supply and demand” reasons well before Tesla’s latest pricing actions. In the summer of 2022, GM lowered the price of its Chevy Bolt by $6,000, making it the lowest price EV in the U.S. Later in 2022, Hyundai decreased the price of its Kona by 9%.
We’re priced where we need to be - Mary Barra, GM CEO
VW’s CEO, Oliver Blume, recently stated that his company will not take part in any price war with Tesla, saying that VW has a clear pricing strategy. Renault’s brand chief, Fabrice Cambolive, also said his company has no plans to cut prices of its EVs in response to Tesla. During the recent General Motors earnings call, CEO Mary Barra stated that GM is “priced where we need to be” based on the strength of their product portfolio and the EVs they have in the pipeline.
Thus, did Tesla really start an EV price war?
I don’t think so! If legacy automakers are forced to re-price the EV versions of their “cash cow” vehicles, that would be a sign of an impactful price war with Tesla. For example, if GM decides it must dramatically lower prices of its EV Silverado pickup truck, that would be a signal that Tesla is becoming a profit-sucking competitive threat to General Motors
Interestingly, Ford’s response to Tesla was to slash prices on the Mustang Mach-E, a direct competitor to the Model Y. Ford’s chief customer officer (Marin Gjaja) said that Tesla’s price cuts made the “competitive marketplace a lot tougher.” Gjaja further admitted that Mach-E is not profitable, and will probably never be profitable (a stunning public admission). However, Ford’s “cash cow” is its F-Series pickup truck franchise. Pricing for Ford’s F150 Lightning EV has remained unchanged.
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