“Tesla’s price cuts challenge Ford and Renault in the electric car segment”

Tesla, owned by “visionary” Elon Musk, has discounted its best-selling Model Y SUV by nearly 30% over the past three months. Thanks to this, in the segment of electric cars, it no longer competes with Mercedes, but with Ford or Renault. “Price wars will break out everywhere,” said Ford CEO Jim Farley. The agency informs about it Bloomberg.

Mercedes also reduced prices, but only in China, a few weeks after Tesla reduced prices. However, German executives are adamant that they do not want to follow Musk and compromise brand value for the sake of more sales of electric cars.

Mercedes-Benz Group AG CEO Ola Källenius, on the other hand, wants to push prices even higher because this strategy is “paying dividends.” The maker said late Thursday that profit was higher than expected in the first quarter, thanks to a resilient pricing policy.

“Tesla isn’t just sacrificing EV margins to meet its volume ambitions. To some extent, it also sacrifices the good reputation and brand equity it has built up,” says Daniel Roeska, Bernstein’s analyst for the European automotive industry.

Competition for Ford or Renault

Musk dropped the price very dramatically and very quickly too. In the US, Tesla reduced the starting price of its best-selling Model Y sport utility vehicle by 29% within three months.

That’s a problem for Ford, which recently discounted its Mustang Mach-E SUV by an average of about $4,500 to stay competitive. Although the automaker pulled back the lead from General Motors Co. last year. in the second position in the sale of electric cars in the US, but remains far behind Tesla.

With Ford not selling as much as Musk and the company investing heavily to catch up, the American company is forecasting a $3 billion loss for its electric car business this year.

However, Renault intends to go one step further than Ford. Not only will it separate its electric car and internal combustion engine businesses, but it also plans launch prices for plug-in cars and software. The head of the Renault brand called Tesla’s price cuts a clear challenge earlier in the week, and investors sold off the French company’s shares on Thursday despite strong first-quarter sales.

Although Renault’s financial director Thierry Piéton answered several questions about the sustainability of the 42,000 euro (about one million crowns) price tag on the Megane E-Tech electric hatchback, he also admitted that the overall pricing policy may be “a little more moderate” in the second half of the year. However, he said that Renault is not planning any drastic changes. “There’s not a lot of incentive to go down with prices and destroy residual prices and go into a spiral that some of the competition is following,” Piéton said.