UK car prices ‘bloodbath’ could be coming, as EV makers fight for sales

Companies tempted to cut EV prices in the face of weak consumer demand and cheap competition from China could face a ‘race to the bottom’ ending in disaster for some brands. That’s the view of Stellantis chief executive, Carlos Tavares, who was speaking at a launch event in Milan on Friday. It comes at a time when discounts on new electric cars have hit record levels in the UK market and used EV prices continue to fall sharply.

Tavares touched on the topic of EV pricing, with a warning that implies rival companies slashing prices on EVs that are relatively expensive to build, could find themselves in deeper trouble long term.

“If you go and cut pricing disregarding the reality of your costs, you will have a bloodbath. I am trying to avoid a race to the bottom,” the CEO said. “I know a company that has brutally cut pricing and their profitability has brutally collapsed.”

Tavares didn’t identify that company, but there has been speculation he might have been referring to Tesla which has cut prices over the past year in a bid to boost its competitiveness, or to a Chinese brand. Stellantis, which owns Vauxhall, Peugeot and Citroen among its 14 brands, is sufficiently profitable to be protected from the effects of any price war, Tavares said. However, he warned that other car makers are likely to become takeover targets if they slash prices and threaten their profitability.

The CEO’s comments come against a backdrop of an increasingly difficult marketplace for EV manufacturers here in the UK, where the rate of adoption among private buyers has tailed off - contrasting with the increasing demand in the fleet market.

Online retailer Autotrader said in its ‘Road to 2035’ report published on 17 Jan that the supply of new EVs is now outpacing demand from retail buyers, and that discounts on new electric cars have already reached record highs.

It says the average discount on a new EV has now reached 10.6 percent, up from 4.8 percent a year ago, while 70 percent of new electric model trims saw average prices fall in December 2023. Used EV prices fell much more dramatically, with prices of 3-5 year old models crashing by 38 percent on average, according to Autotrader data.

“Manufacturer and retailer discounts alone though are not enough to bridge the price gap and stimulate the levels of retail demand needed to convert the next cohort of buyers,” the report says. “In many cases, the average advertised price of a new electric car, including the manufacturer or retailer discount, is still higher than the petrol or diesel equivalent.”

If manufacturers continue to increase incentives on new EVs, the high depreciation on models is likely to worsen further, Autotrader points out.

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