Tesla’s price cuts are putting extra pressure on electric automotive startups

Electric vehicles are rising in popularity with consumers, but even Tesla’s lineup took several years to turn into profitable. With the automaker’s most up-to-date round of price cuts, EV startups which are struggling to earn money could also be put in tough positions, a few of the industry’s analysts say. 

Above: Teslas parked beside the road (Image: Makara Heng / Pexels)

Tesla’s price cuts have effectively waged a “price cutting war,” making it even harder for money-losing EV startups equivalent to Rivian and Lucid to carve out their very own market share, in response to a report from Reuters. The value cuts marked Tesla’s vehicles down by as much as 20 percent, which analysts think could draw recent consumers away from costlier models.

Because of this, analysts and investors say that other automakers might want to respond by either lowering their very own prices, or they could be vulnerable to getting left behind. Tesla stays the dominant market share leader within the emerging EV industry, delivering over 1.3 million vehicles in 2022 — while other, smaller automakers struggle to supply nearly as many vehicles.

Tesla’s price cuts will “strengthen their … competitive advantage over other automakers,” CFRA Research analyst Garrett Nelson said.

Above: A have a look at the recent price cuts on electric vehicles from Tesla and Ford (YouTube: Wall Street Journal)

Neither Rivian or Lucid have turned a profit yet, delivering just over 24,000 vehicles last yr combined. Cost of products on Rivian’s vehicles was roughly 2.7 times its revenue within the fourth quarter, and Lucid’s was roughly 2.5 times its sales.

Still, each corporations have managed to boost funding enough for a large production runway over the following yr or so. Even smaller automakers equivalent to Faraday Future and British EV startup Arrival were already unsure if operations could be funded through 2023 before Tesla’s recent round of price cuts.

Wedbush Securities analyst Daniel Ives likened the situation to a “Game of Thrones” battle, highlighting how close a few of these corporations could also be to being worn out.

“It is a ‘Game of Thrones’ battle for EV startups and so they face some dire options over the following 12 to 18 months in the event that they don’t reach their financial targets,” Ives said. “We might expect some … losers that face the prospect of consolidation or possibly worse on the horizon.”

Lucid is headed by former Tesla executive Peter Rawlinson, and the corporate has yet to announce mass-market rivals to the Model 3 or Model Y. The corporate is as an alternative targeting a luxury market, with its most inexpensive vehicles starting at $107,400. The Tesla Model 3 and Y currently start at roughly $44,000 and $53,000, respectively.

Tesla’s price cuts could push a few of the market’s smaller competitors out of the ring in the approaching months, whilst the corporate stays the market share leader by an enormous margin. Many automakers are set to announce their fourth-quarter earnings in the approaching weeks, which may also offer more insight as to what 2023 could seem like within the EV space.


Source: Reuters

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