We are at the dawn of a new price war, focused – for now – on electric cars but an escalation could take place throughout the market. And it comes, moreover, at a historic moment where many car manufacturers have abandoned, also in the wake of product shortages, the business model aimed at making volumes and all costs to focus on the quality of the sale, favoring the generation of profit.
The increases of the last months
In recent months, in fact, everything has changed: the push, in forced stages, towards electrification with hybrids, plug-ins and full electrics has increased, even in Italy, the price lists and the average price in 2022, according to the Centro Studi surveys Fleet&Mobility jumped to 26 thousand euros with an increase of 7% compared to the 24,300 euros of 2021 (+24% compared to 2019) . Before Covid, around 21 thousand euros per car was enough and the automotive industry was in a regime of overproduction. And this led to deep discounts practiced in all channels and “0” km which lowered prices with the trick of not touching the price lists.
The boom in revenues and margins
The upward race in average prices has brought the Italian market to a value of 35 billion euros with a volume reduced to less than 1.3 million units. A sign that demolition is an irreversible trend and that current data cannot be compared with a world 40 years ago when the sector was not saturated. They are different films, and they are finished, and the world of mobility has changed: from the use of the car, to the average annual mileage, from environmental sensitivity, real or facade, up to the increasingly pervasive use of car sharing or for the use of the car instead of his property.
The turn signals
In recent weeks, however, an event has occurred that disturbs, and will disturb, the sleep of the top management of the houses and goes beyond the confines of the small Italian car market: Tesla has cut the price lists also in the EMEA area. The manufacturer, which culturally dominates the electric car, has decided on a maxi reduction in prices. Model 3 drops by as much as 12,500 euros and the range starts at 45,000 euros (instead of 57,500 euros) while Model Y drops by 5,000 going from i going from 49,990 euros to 44,990 euros. Tesla has shuffled the cards by making its cars more competitive and some major Chinese players are already following suit. The ball passes to the European manufacturers and there is a concrete risk of the outbreak of a price war despite the maintenance of their margins with Tesla in possession of an advantage: in the last balance sheet it exhibited a higher than average margin per vehicle of sector. The alarm is also confirmed by analysts. “In the context of tensions on supplies that are gradually reducing and demand weakened by the recession, it could be difficult – declares Dario Duse, Italy Country Leader of AlixPartners – for manufacturers to maintain the advantage accumulated over the past two years on prices and discounts (on average +3.6 margin points in 2021 alone for manufacturers) ». The challenge – confirms Duse – concerns in particular electric battery (Bev): sales volumes continue to be strongly linked to the presence of incentives. Sales must also rise to access the economies of scale necessary to reduce the cost gap (a BEV powertrain costs 58% more than a thermal one) and to amortize the enormous global investments already made and to be made: 526 billion dollars in the next 5 years on electric.