- Automotive firms are duking it out for the number-one spot within the burgeoning electric vehicle market.
- Ceding profits to market share is an expensive game of chicken, analysts warn.
- This might be a ‘pivotal 12 months’ for establishing customer loyalty within the EV market.
Automotive firms are betting big on an electrical future, but who owns those customers remains to be up within the air.
In a segment that accounted for slightly below 6% of the US automobile market last 12 months, there’s still loads of room for brands to duke it out for the primary spot, long held by Elon Musk’s Tesla.
A recent study conducted by car-shopping site Edmunds found that electric vehicles are convincing automobile buyers to alter brands at much higher rates than historically seen in automotive retail. That leaves a gap for firms to snag recent customers in a business ruled by loyalty.
“There’s a window of opportunity to realize share within the burgeoning EV market,” Wedbush analyst Dan Ives wrote in a recent note to clients. “2023 is a pivotal 12 months that can establish the winners and losers on this EV landscape.”
Tesla took the primary swing, risking some $7 billion in profits this 12 months to slash the costs on its hottest vehicles by as much as 20%. Ford hit back, cutting the worth of its electric Mustang Mach-E by between 6% and eight%.
Chasing market share over profits
Each firms are opting to cede profits for market share in a dear game of chicken, analysts said. Tesla and Ford have cited demand that exceeds supply on the models they’ve discounted, meaning any price cuts “defy logic,” Bank of America analyst John Murphy wrote in a recent note.
While there’s more evidence that Tesla is definitely selling down some backlogged supply because the end of last 12 months, Murphy still called the move to lower prices “odd.” He warned of long-term impact on profitability for any company undercutting the worth of their vehicles.
“The irrational pricing spiral that appears to be starting on EVs will hopefully be quickly remedied by criticism by investors, if heeded,” he wrote. “If not, we consider there is important risk.”
‘The time is now’ to win over EV customers
There was some immediate impact amongst customers for each Tesla and Ford’s price cuts. Tesla saw a surge in interest from recent buyers, while Ford customers said they were impressed with Ford’s decision to repay them the difference for his or her Mach-Es bought at the next price.
Not every company duking it out for customer loyalty within the EV space is cutting prices. GM – opting out of the pricing war for now – goes after customer loyalty with an EV helpline open to all electric automobile owners. But when history is any guide, more firms will take part the worth slashing if their market share starts to slide.
In a Thursday earnings call, Ford CFO John Lawler said the corporate sees “market forces” driving down the typical price paid for any vehicle this 12 months down by about 5%.
Nevertheless an organization goes about constructing EV loyalty, this 12 months is shaping as much as be make-or-break for firms as they lure customers to the burgeoning electric automobile segment.
“The time is now to realize market and mind share with consumers,” Ives wrote, “otherwise they may lose an EV customer endlessly.”