There are a number of reasons Tesla has garnered the success and scale that it enjoys in the EV market today, not the least of which are an early-mover’s advantage and the impressive commitment to its Supercharger network. Now, though, as more legacy carmakers are entering the fray, Tesla’s previous advantages may not be enough — at least that’s what Stellantis’s CEO, Carlos Tavares, seems to think (via Reuters).
“They are entering my world, the world of tight pricing, cost competitiveness, and the operational issues that a big company like ours may face.” – Carlos Tavares, CEO, Stellantis.
Stellantis’s CEO may have a point here, as the last few months have seen significant changes to both Tesla’s line-up and the EV market as a whole. Not only have legacy carmakers, like BMW, Chevrolet, Ford, Hyundai, Kia, Stellantis, and Volvo started to seriously compete in the electric-vehicle market, but Tesla is facing stiff competition on the Chinese front, too.
“If we are racing for the bottom in terms of facing the Chinese with price cuts, Tesla will have problems with that strategy before we do, because we are more profitable than Tesla.”
Whether it be due to the increase in competition, a shift in the demand, supply chain, and production efficiency, or some combination of the lot, Tesla has recently suffered a bit of a blow to its profit margins. This is due to an aggressive pricing strategy it adopted after initiating a price war earlier this year.
“The result of the fact that Tesla is now entering my world, is that their profitability moved from more than 17% in the first half of 2022 to 10.5% in the first half of 2023. They were more profitable than Stellantis, now they are less profitable than Stellantis.”
On the other hand, Tesla’s substantial price drops may be some sort of 4D-chess manoeuvre to apply more pressure to its competition. It appears to be diversifying its revenue streams significantly by opening its Supercharger network to other EV brands through the increased adoption of its NACS port.
Unfortunately, this diversification strategy may come at the cost of eroding the competitive advantage Tesla’s Supercharger network afforded the company. For the first time ever, though, electric vehicles are approaching up-front price parity with their ICE counterparts, which can only be a good thing for consumers looking to get their hands on an EV.
For its part, Stellantis appears to be targetting multiple fronts with its EV strategy, with its colourful Fiat 500e and 600e compact hatchbacks, Jeep Avenger EVs, and the upcoming RAM 1500 REV, among others. It remains to be seen how profitable Stellantis’s EV efforts are, since the company is a little late to the game.
It’s safe to say that a lot of car buyers are probably holding out for more well-known brands to bring feasible EVs to market before making the switch to electric. The automotive industry does seem to be moving in that direction, especially with the recent announcement of an ambitious new EV charging network being spooled up by a bunch of traditional car brands, including BMW, Hyundai, Kia, and Stellantis.
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