As Tesla cut prices again and the number of cheaper Chinese-made models are coming into Britain, the trade is seriously worried about how they will make money as spending tightens.
Motor manufacturers should aim to avoid the electric vehicle (EV) market becoming disorderly despite pressure in the sector that could lead to a potential price war, says FleetCheck.
Peter Golding, managing director, said that sudden, dramatic price reductions in recent days in some markets could soon spread to the UK, something which was not necessarily good news for fleets.
He said: “Big EV price cuts are very much a double-edged sword for fleets, sometimes prompting immediate surges in demand but also potentially hitting residual values (RVs) and simply making it difficult to know when to buy.
“There is a lot of news on a global basis about major EV manufacturers such as Tesla and BYD cutting prices in major markets and it is understandable they should want to do so. They have created huge manufacturing capacity and sometimes have considerable inventory. It’s imperative from a business point of view that they keep sales moving at a point in time where there are some indications that global demand has momentarily plateaued.
“Cheaper EVs are obviously a positive on one hand but this kind of disorderly marketing does create issues for fleets. At the most basic level, it becomes tricky to know whether now is a good moment to buy? For example, if Tesla decided to cut UK prices this month but still have high levels of stock, will they do the same again in the summer and should businesses wait to see what happens?
“At another level, any kind of price war makes setting RVs very difficult. There is already a medium-long term expectation that we will see EV prices fall as the technology becomes more accessible and production volumes increase, but there has perhaps been an assumption that this will happen gradually. What we have instead are quite sudden, headline grabbing price reductions.”
Peter said that fleet confidence in the EV sector would be easier to maintain if manufacturers took a responsible attitude towards making sure that the market was as orderly as possible, despite the impetus to reduce prices.
“If fleets believe a manufacturer is possibly going to suddenly take several thousands of pounds off the price of a car, it potentially makes them less rather than more likely to buy. Smaller, regular reductions that appear part of a long-term strategy are more sustainable than immediate, dramatic cuts that have something of an air of panic.
This is not just essential for the new car market but the used sector, too. While there are some signs that we are seeing a normalisation of the used EV market following the huge falls in values seen in 2023, any kind of new EV price war will fuel wariness among both dealers and used car buyers. The importance of a properly functioning EV market for fleets undergoing large-scale electrification cannot be overstated. By Robin Roberts Miles Better News Agency
