By now, there’s no doubt. Elon Musk is a killer. Musk has started a price war in the largest and most competitive EV market — China — sacrificing Tesla’s profits to run others out of business.
Too many options, not enough sales
China’s EV market is hyper-competitive — dominated by Tesla and Buffett-backed BYD, with ~40% of Tesla’s total sales coming from the region.
- Chinese EV maker NIO (NYSE:NIO) said, “It’s almost consensus that China now has too many automakers” (BBG).
- Hundreds of EV models from brands like GM, Toyota and Honda are hitting the market in the coming years.
Cut or die: The war started last October when Tesla reduced prices — forcing others to follow.
- “The severity of this cycle of price cuts is something that I’ve never seen,” — per Sino Auto Insight’s managing director (NYT).
- “If we don’t cut prices, we really can’t survive,” — per one Huawei EV salesperson (CNN.
While Tesla has the profits to back a price war — many other EV companies are losing money and are already struggling. Cash-burning NIO is holding back — saying it wouldn’t join Tesla’s “price war.”
Is it working?
Since last year, Tesla’s market share grew from 7% to 10% — while BYD’s grew from 30% to 45%.
- The price cuts coincided with China’s 13-year EV subsidies ending last December.
- This led to a 38% sales drop in January from a year ago. Tesla’s held stronger as sales grew 10% while XPeng’s fell 60%.
Tesla’s master plan works if it can successfully hold market share in the long run. Otherwise, it’s a race to the bottom.
