Tesla launched competitive offers for electric cars and Volkswagen reacted late, but consumers are taking advantage

If I had bought a Tesla Model 3 , Tesla Model Y , Ford Mustang Mach-E or Volkswagen ID.3 five months ago, I would be very unhappy now and keep asking myself the following question: what is the profit margin of these car brands?

The prices of these four cars have all fallen during this period, twice for the Teslas , and only the Volkswagen ID.3 has been updated, although the changes are minimal, giving the impression that all these cars are equal. It would be inevitable to be disappointed with my purchase.

Why did some drivers have to shell out more money for the same cars a few months ago, and why are these brands now deciding to lower the prices of their cars?

China is watching closely as companies engage in price war

For many years, I have often heard the phrase "when electric cars become widespread, they will be cheaper". However, even though the supply and demand for electric cars has increased over time, their price is still prohibitive for most people in France.

Although the Dacia Spring or MG 4 models are more affordable, it is important to note that their thermal versions would have cost half only two or three years ago. Thus, the notion of "cheap electric car" is still a utopia, especially since prices have increased in recent years, just like for other types of cars.

This is why the recent trend observed at Tesla and Volkswagen is significant. Indeed, last January, Tesla made a decision that went against the general trend by lowering the price of its least expensive cars, the Model 3 and the Model Y.

Shortly after Tesla cut the price of its SUV, Ford responded by lowering the price of its Mustang Mach-E so as not to lose ground to the Model Y. At the time, it may have been too early to Talk about a price war, but now with Tesla's new price drop and the sale of the renewed Volkswagen ID.3 at a lower price, there's no denying that the competition is fierce.

It was predictable that Volkswagen would lower its prices, since it had announced this intention when it presented the update of its electric compact a few weeks ago. It makes sense that the base Volkswagen ID.3 can't compete with the base Tesla Model 3, which is in a higher segment and has more power and range.

Some even predicted that Volkswagen's price cut could bring the ID.3 down to less than 40,000 euros, which is interesting considering that the starting price was recently 45,010 euros in the brand's configurator.

In the end, Volkswagen decided not to spend a considerable amount of money and reduced the starting price of its electric compact to 42,600 euros, a saving of 2,410 euros so far. This decision would have been relevant yesterday because the initial price of the Tesla Model 3 was 46,200 euros, and the goal was achieved: the revised Volkswagen ID.3 was again cheaper than its American counterpart.

However, Volkswagen had not anticipated Tesla's recent move. Indeed, at the same time as the price drop of the Volkswagen ID.3, Tesla again lowered the prices of the Model 3 and Model Y. This is the second time that Tesla has reduced prices this year, and this politics has changed the game of the price war, making the Tesla Model 3 even cheaper than the Volkswagen ID.3.

From today, the basic version of the Tesla Model 3 is available for sale in France for 39,990 euros, which makes it 2,610 euros cheaper than the ID.3 and places it just below the symbolic bar of 40,000 euros.

Although both models are sold at PVP, they are both eligible for government assistance in their entry-level versions. One might think that the coincidence of this second price drop with that of Volkswagen is fortuitous, but that would be naïve.

The electric car price war is very real, with many factors at play such as commodity prices returning to normal, growing demand and cheaper production of these vehicles compared to combustion vehicles despite the cost in terms of jobs.

China is at the heart of the electric car price war.

It is important to note that Chinese brands have a significant influence in the price war by offering higher quality cars at much more competitive prices than Western models, as shown by the MG 4 Electric .

Traditional brands must therefore react or risk disappearing, as shown by the example of the future Volkswagen ID.2 , which will cost less than 25,000 euros after the commercial fiasco of the ID.3. Although this allows customers to buy electric cars cheaper, it does not necessarily mean that they are affordable for everyone.

If someone wants to buy an electric car, they will have to think about what may happen in the coming months and will only take the plunge if they really need it. It is possible that prices will continue to fall in the future, as this price war has only just begun.

People who bought a base Tesla Model 3 in December 2022 for $51,990 probably won't be very happy, as its price dropped by $12,000 just four months later.