For some time, Elon Musk’s Tesla has dominated the electric vehicle market. Despite that, they have cut costs SIX TIMES this year alone! So the question becomes, is Tesla intimidated by the competition or is it strategy?
According to reports from CNN, the renowned automaker slashed the price of their electric vehicles (EV) four times in Q1 of 2023.
Then, they did it again in April 2023 — twice!
As a result, the company’s revenue dropped $1.3 BILLION from Q4 of 2022, which rustled the feathers of shareholders.
To that, Tesla’s celebrity CEO had interesting comments on its prices, competition, and the current marketplace…
The EV Price WAR
While investors may be disappointed in Tesla, the electric vehicle giant is still the most valuable automaker out there.
AND THEY CONTINUE TO BE REGARDLESS OF ESTABLISHED AND NEW AUTOMOBILE COMPANIES GETTING INTO THE EV GAME.
Elon Musk says that Tesla making their vehicles more affordable has little to do with competition…
“WHILE WE REDUCED PRICES CONSIDERABLY IN EARLY Q1, IT’S WORTH NOTING THAT OUR OPERATING MARGIN REMAINS AMONG THE BEST IN THE INDUSTRY. WE’VE TAKEN A VIEW THAT PUSHING FOR HIGHER VOLUMES AND A LARGER FLEET IS THE RIGHT CHOICE HERE VERSUS A LOWER VOLUME AND HIGHER MARGINS.”
Also, Musk commented that during uncertain times consumers are not likely to make large purchases like new cars.
Whatever the reason, other automakers are responding to Tesla’s reduced prices in kind. One notable example is the European manufacturer Skoda Auto.
On Apr 28, 2023, the Czech auto brand announced an economy version of its electric SUV for under 40,000 euros.
Martin Jahn, Skoda’s head of sales and marketing, said it was done in direct competition with Tesla.
“OF COURSE, IT IS RESPONSE TO TESLA PRICE CUTS, BUT ALSO SOME MARKETS WERE ASKING US TO BRING A CHEAPER CAR WITH SHORTER RANGE.”
So, Tesla has brought on this price war upon itself. Nonetheless, some industry experts say that they’ve seen this strategy before…
Tesla Takes a Page From History
Analysts and executives of other manufacturers are saying Elon is doing the same thing as the first billionaire, Henry Ford.
In 1913, Ford was able to reduce prices because of industrial innovation and used it to drive Model T sales.
Unlike Henry Ford, Elon’s goals seem to be focused on Tesla’s production and prevalence as opposed to sales and competition. However, current Ford CEO, Jim Farley, has a warning for Musk…
“I THINK THAT HE’S GOING TO LEARN IS PRODUCT FRESHNESS MEANS A LOT. THE PRODUCT GETS COMMIDITIZED AND THEN YOU LOSE YOUR PRICING PREMIUM. THAT’S A DANGEROUS THING.”
All that being said, some lessons can be taken away from Tesla’s self-imposed competition…
Has Competition Been Healthy for Tesla?
At the end of the day, Elon calling for lower costs has kept Tesla at the forefront of the public’s mind despite reduced spending.
Ultimately, initiating the price cut before the competition — instead of in response — keeps Tesla the leader in the space.
We can’t say for certain how this strategy will play out long term. But for now, Musk is still calling the shots in the electric vehicle game which illustrates the point….
Dominate, don’t compete.
— GCTV Staff
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