You have a million crowns and a choice: buy either a Tesla Model Y or a Volkswagen ID.3. Which car do you prefer?
but real customers face this choice. The mentioned models – both for around one million crowns – compete directly in terms of price. Is VW’s offer competitive enough? Should VW executives in Wolfsburg be happy with the way they compete with Tesla? They certainly hadn’t. The German giant is currently losing its market to new competitors live.
European car companies have recently invested hundreds and hundreds of billions of euros to move their massive business that has been stable for decades. Simply put, to switch from the production and sale of cars with internal combustion engines to electric cars under the pressure of giant regulations from the European Commission.
The enormously expensive change in the functioning of car factories is succeeding, and we can watch how only electric models roll off the production lines of some plants. An example is the VW plant in Emden, Germany.
European automakers have failed in a key matter
However, European automakers failed in one absolutely crucial matter. They failed to get drivers excited enough about electric cars, or to convince them that their electric cars are worth it. Combined with the events of recent years, when electricity prices soared, the war in Ukraine caused uncertainty among Europeans, and inflation forced households to save, today, despite continuous growth, the demand for electric cars can be described as dismal.
The unfavorable situation is well illustrated by the current production/sales ratio of the German brand Volkswagen. The automaker produced 97,000 electric cars in its European factories in the first five months, but sold only 73,000 of them. According to sources in the German newspaper Handelsblatt, demand for some models has dropped to almost zero. In contrast, Tesla’s Model Y sold over 100,000 units in Europe during the same period.
The representatives of the European car companies themselves admit that they expected that they would be able to start the interest in electric cars more quickly. Because of their optimism, they now have to put the brakes on production because their factories are churning out more electric cars than the market is willing to accept. In this situation, companies need to secure sales, even at the cost of lower margins. This is recording price wars. This was already started by Elon Musk when he significantly discounted the aforementioned Model Y this year. Thanks to this, the American automaker sold 889,000 cars worldwide, which is more than the German trio of Volkswagen Group, BMW and Mercedes-Benz managed to sell electric cars together (about 600,000). In addition, Model Y became the best-selling model in Europe.
For traditional European automakers, Tesla’s attack is not good news. In addition, predatory automakers from China are also flocking to the old continent with an offer of affordable electric cars. Above all, the BYD brand demonstrated its strength in Sweden, where it dominated sales of electric cars in July.
New cards are being distributed in Europe
The goal of Musk and the Chinese brands is clear. The arrival of electromobility in Europe is perceived by the raiders as an opportunity. New cards are being dealt in the market and they can change the balance of power in the coming years. According to them, even giants who seemed invincible for many decades can shake.
While Tesla and the Chinese are aggressively moving forward and attacking with low prices, European brands are still heavily burdened by the past. If Musk is figuring out where to build a new factory in Europe and what incentives to get it, Volkswagen has yet to figure out how to efficiently convert old “combustion” factories into electric factories. Nor has he yet resolved how he will deal with the tens of thousands of employees who will no longer be needed in the modified automated factories.
In the next two years, European car manufacturers promise to also come to the market with affordable electric cars. Customers will receive, for example, the electric Renault 5 or VW ID.2, the price of which will be around half a million crowns. In 2025, the small VW ID.1 car will arrive on the market, the price of which will probably be even lower.
However, cheap small cars cannot be called jokers with which European brands will start winning the price war. After all, the trend for internal combustion engines has been exactly the opposite in recent years: people tended not to care for small cars, on the contrary, they increasingly bought large cars, especially SUVs. But European automakers cannot yet offer these cars at a low price. At least not one that would beat Tesla. Musk’s car company can afford much more than its European competition, as it is technologically much further ahead in electromobility. In the meantime, European concerns have no choice but to optimize production and patiently pour tens of billions into innovation in order to match the predatory American and Chinese competition.
Tradition vs. dynamics
It is literally a culture clash. A fast-expanding business from the US that solves problems as it goes, versus a European “locomotive” that slowly gets going, but then it’s hard to stop. Until the European car industry moves fully into the electric era, it will mainly believe that it will not be disappointed by the traditional European customer. One who has deep-seated truths about “German” quality, prefers cars that aren’t made overseas, and feels better about having an authorized service center on every corner. And they will also believe in the fact that these traditional customers will be willing to pay extra for the supposed European quality (it must be added that quality today also includes the quality of the software that car companies offer in their cars).
An example is the new luxury car VW ID.7, which Volkswagen started producing in Emden last week and whose price starts at around 1.25 million crowns. VW management says about the electric car that it is actually the “Passat of the electric era”. And they are trying to reach their loyal customers who still haven’t switched from gasoline or diesel to electricity.
Will the Germans manage to reach a traditional European and sell him something unconventional from their side? The question is the same as at the beginning of the text: Can you have a Tesla Model Y or a VW ID.3 for a million crowns? What will you choose?
2023-09-03 10:45:18
#Musk #China #fueling #price #war #Europe #pace
