Tesla and Ford have both announced price cuts on their electric vehicles (EVs) in the US. Elon Musk’s Tesla reduced prices on some models by 20%, including a $13,000 cut on the base price of its Model Y SUV. Ford followed suit by announcing price cuts on its Mustang Mach-E SUVs, with an average price drop of $4,500.
The price cuts were made in response to new subsidies on EV purchases and the potential for a recession, which may affect people’s willingness and ability to pay current prices. Tesla and Ford cited the need to cut consumer costs so that buyers can maximize on the tax credits of up to $7,500 offered for EVs under a certain price.
More competitors are entering the market and there will be 50 new EVs added this year, with GM and BMW planning to launch dozens of EVs by 2025. Prices for used EVs have also declined significantly, with the average used EV on the market now below $50,000 for the first time since November 2021. If you are thinking about buying an electric vehicle, 2023 could be a good year.
Good news for buyers, what about investors?
While a few other EV manufacturers have said they do not have plans to change their prices, investors worry that the price cuts, along with the release of dozens of new EV models later this year, could cause prices to spiral lower and impact profitability. Margins are crucial for EV makers and at the moment Tesla has the best margins in the industry.
Who is leading the way in EV adoption?
In terms of EV adoption, the US had 10% of electric vehicles make up all new car sales in 2021 and about 5% of cars on the road are electric. The Biden administration has set a goal for half of all new vehicles sold in the US to be electric by 2030. Tesla dominates EV sales in the US, accounting for 72% of the 487,000 new EVs sold in 2021.
China is officially the biggest market for EVs in the world. About 14% of all cars in China are now electric. And last year 22% of all new cars sold were fully electric. BYD sold about 1 million EVs last year, but they do have a lot of hybrid model cars as you said – which combine the power of petrol engines with the efficiency of electric motors.
Across Europe, 22% of vehicles are electric already. There are a bunch of incentives and laws being put in place throughout Europe and the UK to encourage uptake. For example, sales of new petrol and diesel cars and vans in the UK will be banned from 2030.
If you want to learn more about the potential EV price war and whether it’s a good time to buy one, check out our recent episode of The Dive!