Volkswagen has announced a new version of its flagship ID.3 electric car model at under €40,000, representing a €3,000 markdown from its current price tag. The move is seen as a direct response to several rounds of price-cutting by Tesla in recent months, including discounts of up to 20% in Europe and the United States. Tesla’s sales in Germany rose by over 900% YoY in January, making it the top-selling e-car in the country that month. Although Volkswagen was Europe’s leading e-car manufacturer in 2022, with 352,000 vehicles sold, the German firm’s hand has been forced by Tesla’s audacious markdowns.
Industry insiders see the move as a direct response to several rounds of price-cutting by the Elon Musk-owned company in recent months, including discounts of up to 20 percent in Europe and the United States.
In Germany, Tesla’s sales soared by more than 900 percent year-on-year in January. As a result, they were making it the top-selling e-car in the country that month.
Although the 10-brand VW group was Europe’s leading e-car manufacturer in 2022, with 352,000 vehicles sold, Tesla’s audacious markdowns have forced the German firm’s hand, said industry analyst Ferdinand Dudenhoeffer.
“Volkswagen sees how big the threat is from Tesla,” he told AFP.
The automaker will have “no choice” but to enter “a price war” to defend its place in the hotly contested market for battery-powered vehicles, even if that means profit margins take a hit for a while.
VW group CEO Oliver Blume has ruled out a general price drop on all e-cars, but the topic is bound to come up when the group presents its 2022 financial results on Tuesday.
China, the world’s largest auto market, is a crucial battleground in the electric car price war, with local manufacturers such as Nio and Xpeng offering cheaper models than foreign brands.
Nio, which surpassed Tesla as China’s top-selling e-car maker in 2021, has already cut the price of its ES8 model by 15,000 yuan ($2,300) to 468,000 yuan.
Xpeng has slashed prices and offers free annual charging to buyers of its P7 model.
Tesla, which has been manufacturing cars in Shanghai since 2019, has responded to the challenge by lowering the starting price of its Model 3 in China to 235,900 yuan ($36,500) last month.
Volkswagen, which is also targeting China with its ID.3 and ID.4 models, will have to keep a close eye on the local competition as it seeks to win over Chinese consumers with its electric vehicles.
The German automaker is targeting global sales of one million electric vehicles by 2025, up from 231,600 last year. It plans to invest €35bn ($40bn) in e-mobility by 2025 as part of its ambitious electrification strategy.
As the electric car market grows, the price will be critical in determining which brands come out on top. With Tesla and local Chinese manufacturers already offering competitive prices, Volkswagen’s decision to lower the cost of its ID.3 model is a sign that the company is willing to fight to defend its place in the market. The coming months and years will determine which companies emerge as leaders in the electric car segment.