Global pricing approaches that are significantly less complex can prove crucial in determining market success, according to Jato Dynamics.
Using live data from its Price Tracker tool to explore how OEMs are managing prices across different models, it highlighted how uniform pricing strategies across international markets can have a profound impact.
It cited Tesla’s changes in the German market in April 2023 as a case in point, using tracking data to demonstrate how the brand managed to boost competitiveness with a sudden price cut of its whole line up.
Jato Dynamics identified two pure price decreases of the Model Y in the German market within four months. In January 2023, Tesla reduced prices for all versions by €4,000 on average before a further €1,333 decrease that April. Simultaneously all versions of the Model Y Performance AWD saw a €4,000 price drop which equated to an overall average price reduction of 7%.
“Tesla has a similar pricing strategy in the US and the EU5 (France, Germany, Italy, Spain and the United Kingdom),” it noted, “with a very similar volume weighted average manufacturer suggested retail price (MSRP) in both regions. As a result, their offer approach is much less complex, which has a positive effect on the production costs.”
Many car makers have a significantly different approach to pricing strategies in the US and because retail prices are growing faster overall, a considerable disparity between pricing for BEVs and other powertrains is developing, not evident in other regions.
“This is highlighted by the different price strategies taken by Volkswagen and Tesla. Volkswagen’s battery electric vehicles (BEV) are around €10,000 more expensive in the US than in the EU5; the manufacturer has a different sales strategy in the two markets.”
It noted that following Tesla’s price war, competitor reactions have been fairly moderate, allowing the brand to retain its market leading position for BEVs. Even so, across the market, it noted that several car makers had repositioned their vehicle pricing in response to Tesla’s changes in terms of both pure price and incentive changes.
Just months after Tesla’s price drop Ford reduced the pure price of the Mustang Mach-E in July by €10,260, also adding new specifications to increase the market value by increasing the functionality of the parking distance system.
Similarly, the Nio ET5 made both price and specification changes in response to Tesla’s cuts through reducing the MRSP for all ET5 versions by €2,400 in March 2023. However, at the same time, it reduced warranty from 60 months to 36 months which represented a value reduction of €700. Also that March, Nio replaced the ET5 Premier edition with a standard version with a lower entry price.
Hyundai also adjusted its pricing strategy for the Ioniq 5. In September, Hyundai made some small value adjustments and reduced the price of its High Power AWD version by €2,400 and also extended warranty for 60 to 96 months in the same month.
“Other key competitors in Germany, such as the Polestar 2, the Jaguar i-pace and the Kia EV6, have not yet responded to Tesla’s price adjustment, choosing to keep their MRSPs flat.,” noted Jato Dynamics. “There could be many reasons for this. For example, some manufacturers have a lower margin for BEV models, making it more difficult to reduce prices significantly while making a profit.
It noted that low prices from Chinese OEMs could present a challenge to established OEMs in the West, especially as a similar pattern can be seen when BEVs are separated out. In China and the EU5 countries, BEV retail prices increased by 14% between 2021 and 2022, staying roughly in line with the market for all powertrains. However, during the same period, consumers in the US faced a 37% price increase.