EkaLore uses the Alien Invader framework to look at companies that seemingly come out of nowhere to dominate a market space. They come from another market or geography, confound their competition by not playing by the “rules,” and suck the most profitable business out from underneath their competition.
EkaLore examined Tesla’s strategic price changes as a competitive weapon at the end of 2022 in a four post series. The early results of the markets’ reaction to this reduction are in. Those results indicate trouble ahead for traditional vehicle manufacturers.
Tesla reduced listed prices for vehicles in China, the USA, and the EU. As production climbs in the Austin and German Gigafactories, Tesla has more inventory for those and global markets. In January 2023, sales of Tesla vehicles in China climbed 18% from December, on top of an increase of 10% from January 2022. The effects in the USA and EU markets are not yet known.
Competitive vehicles from NIO (46.2% drop in January from December and 11.9% decrease year on year), Li (28.7 monthly drop, 23.4% YoY), and XPeng (53.8% monthly drop, 59.6% YoY) saw decreases. BYD saw increases for at least part of January, with sales doubling when counting EVs and hybrids.
In a further sign that pricing changes are affecting global pricing, Ford reduced prices on the Mustang Mach-E electric vehicle at the end of January to be more competitive with Tesla prices.
Chinese sales of NEVs climbed to 6.89M vehicles in a 26.86M unit market. The Chinese vehicle market increased 2.1% while NEV sales climbed 93.4% with a selling run rate of 9.77M in December 2022. Battery electric vehicles as a portion were 73% of NEV sales and climbed 81.7% year on year.
These numbers are good signs for EV manufacturers like BYD and Tesla. Rapidly increasing EV sales are a challenge for incumbents because they have to carry on their current business while funding a whole new one.
Traditional internal combustion companies (e.g., Volkswagen) must continue to invest in new platforms, manufacturing capacity, and loss-making EV market entry as they look to convert their brand equity into future sales. A mixed market position shows buyers of traditionally fueled SUVs and large combustion engine vehicles (such as the Ford F-150) keep vehicles for long periods (averaging above 10 years in the USA market). This means the generated brand equity keeps loyal buyers using their products even as new buyers shift to newer EV platforms. The fight against Alien Invaders like Tesla, Volvo-Polestar-Geely, and Chinese EV manufacturers will be expensive in every respect for traditional manufacturers in the USA and EU.
To read more about Alien Invasions in the car and other industries, read our blog at www.ekalore.com/alien-invaders
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