Elon Musk might have felt the January blues more than most this year. The Tesla CEO watched helplessly as his group lost its crown as the world’s biggest EV maker to Chinese juggernaut BYD, possibly kissing goodbye to his throne for good.
The Warren Buffett-backed carmaker shifted more models than Tesla in the final quarter of 2023, showing it was the more popular option in its native China while shocking carmakers across the globe with its low prices.
BYD’s plan to build a production center in Hungary and Volkswagen’s ascension to the German EV throne in 2023 suggest the road in Europe will only get bumpier for Musk and his carmaking giant.
Tesla, though, is now planning to use the same playbook in Germany that it adopted in China to ward off the threat from BYD and Volkswagen while shifting excess models of its cars.
But recent evidence suggests that strategy isn’t winning over investors like it did in 2023.
Tesla spies growing BYD threat
Tesla cut the price of its Model Y Long Range and Model Y Performance in Germany by €5,000 to €49,990 ($54,340) and €55,990 ($60,583) respectively, according to its website. The cuts are equivalent to discounts of up to 9%.
After announcing itself as an early industry leader, Tesla is losing ground to native carmakers in its foreign markets. German carmaker Volkswagen surpassed Tesla for market share of EVs in Germany in 2023, Reuters reported citing data from German federal motor authority KBA.
BYD has a tiny presence in Europe, commanding a 0.1% market share in November with just over 13,000 deliveries, according to figures from Dataforce reported by Automotive News Europe.
A 25% import tax in the U.S. as part of the country’s bitter trade war with China has also prevented the group from making major in-roads in the States.
However, BYD will hope a new factory in Hungary can help it raise its profile in Europe, and that it will be able to win over skeptical customers with prices that have left its competitors in a daze.
BYD has control over the entire supply chain of its EV batteries, which account for 40% of a new car’s price.
This has helped it push prices well below other manufacturers, with its cheapest Seagull model retailing for around $11,000 in China.
BYD’s ultra-low prices, though, have raised eyebrows among European regulators. European Commission President Ursula von der Leyen said it would investigate distortion by the Chinese EV group and its effects on competition across the continent.
“Their price is kept artificially low by huge state subsidies. This is distorting our market,” von der Leyen said in September.
“And as we do not accept this distortion from the inside in our market, we do not accept this from the outside.”
Still, in anticipation of BYD’s growing threat and Volkswagen’s establishment as a European EV stalwart, Tesla has introduced a familiar strategy of price cuts to help shift its models in Europe.
Tesla price cuts no longer an investor winner?
The Texas-based EV giant is just coming off similar discounts in China, reducing the price of its Model 3 Sedan by 5.9% and the price of its Model Y sport utility vehicle by 2.8%, according to the group’s website.
Tesla’s cuts in Europe also come a week after Volkswagen introduced discounts on its ID line in France, Belgium, Germany, and Norway to compete with Tesla and BYD, Automotive News Europe reported.
Tesla kicked off a price war in China and the U.S. at the start of 2023. It helped ignite a stunning recovery in the company’s share price after Musk watched its value get sliced in half in 2022.
In August, Tesla restarted those price wars with BYD, offering customers in China a 4.5% discount on its Model Y cars that helped send the value of BYD shares down 6% following the announcement.
However, this month’s price cuts in China have only served to dampen investor sentiment on Tesla shares, which have declined more than 7% in the last week.
Last week’s price cuts were “more moderate than the market had expected,” CNBC reported citing an analyst note from Morgan Stanley. It calls into question how much more force Tesla and Musk can muster in its ongoing gruesome price war, and how long it can withstand the seemingly inevitable march of BYD into the West.
Tesla’s latest discounts in Germany might come as a surprise as they landed a week after the group said it would be forced to suspend most of its production at its Berlin Gigafactory for about two weeks from the end of January.
The group blamed disruption from Houthi Rebel attacks in the Red Sea on the delays, which have disrupted the supply chains of several major manufacturers.