Image: Maura Losch/Axios
A growing number of competitors are threatening Tesla’s global EV dominance, putting it in an unfamiliar position — one of defense.
Why it matters: This pressure, coupled with less favorable economic conditions, has prompted the company to slash prices in order to generate new demand for its cars.
- “Tesla has always been an automotive anomaly… the outsider like a new, shiny, bright object,” Edmunds executive director of insights Jessica Caldwell told Axios.
- “The move they just took to protect market share and their own growth [is] such a traditional automaker move,” Caldwell said.
Catch up fast: Last week, Tesla lowered the prices of its Model 3 and Model Y vehicles, which are among the best-selling cars in the world.
- The cuts ranged from 1% to 20% in the company’s key markets — the US, China and Germany.
- Notably in China, Tesla’s price cut was the second in less than three months.
- Japan and South Korea also saw cuts of around 10%.
In the USA, Tesla has one of the highest brand loyalty rates among luxury car names and continues to dominate EV registrations.
- However, its market share has fallen from 79% of new electric vehicles in 2020 to 65% in September last year, according to S&P Global Mobility.
- “Tesla’s EV-only strategy gives it a retention advantage – to which few EV owners have returned [internal combustion engines]. But when new electric vehicles arrive, loyalty will be tested,” the report concludes.
- The most serious threats come from electric vehicles costing under $50,000 “where Tesla isn’t really competing yet.”
Be smart: With the cuts in the US, more Tesla models will be eligible for newly revised $7,500 tax incentives introduced on January 1 as part of the Inflation Reduction Act.
- The credit applies to EVs under $55,000, meaning models like the high-end Model 3 Performance are now $53,990 (down 14% from $62,990) and the long-range all-wheel-drive Model Y is $52,990 US Dollars (down 20% from US$65,990). could be more attractive.
Worthless: Tesla had raised prices over the past two years as higher inflation increased the cost of its inputs. CEO Elon Musk said last year the company’s prices had become “embarrassing” and that he hoped to lower them.
- “I think inflation will come down towards the end of the year,” he said. “I’m hopeful — and that’s not a promise — but I’m hopeful that at some point we can drop the prices a little bit.”
Something to see: customer loyalty.
- People who bought their vehicles before the cuts complained tens of thousands of dollars in savings they rarely missed.
- Angry customers in China have been demanding discounts and protesting the company in showrooms and distribution centers.
- A measure of the company’s goodwill is down 15 percentage points since the start of last year.
our thought bubble, via Axio’s transportation correspondent Joann Muller: Tesla only has two big arrows up its sleeve — the Model 3 and the Model Y. And that may not be enough to attract buyers, whose heads will be turned by a far greater array of options from other manufacturers.
go deeper: The plunge in Tesla stock is widening the gap in the outlook