Tesla’s price cuts are a challenge to automakers, says Renault CEO

Tesla’s recent further price cuts should be taken as a “warning” for other automakers amid what some see as an “EV price war,” says Renault CEO Fabrice Cambolive.

Since the start of the year, Tesla has adjusted its pricing many times, including two significant price drops across its entire lineup.

The aggressive price drops have led other automakers to reduce the prices of their electric vehicles – leading some to believe that Tesla might have started a price war.

Following the most recent price drop in Europe last week, Fabrice Cambolive, the head of the Renault brand, said that he believes automakers should take Tesla price cuts as a “warning” (via Reuters):

It’s clear that (Tesla cutting prices) is a challenge, starting with the cost side of things. It’s a warning that we are looking at.

Renault has slightly discounted its electric Megane, leading to a surge in sales in March, but the price reductions weren’t as deep as Tesla’s.

Nevertheless, the CEO said that it is looking at the price of its electric vehicles “market by market” for potential adjustments:

We will analyze country by country, market by market, which level of competitiveness we need to have to stay in the game.

Tesla’s own price cuts have been successful in increasing sales, with Tesla delivering a new record number of vehicles last quarter.

However, Tesla CEO Elon Musk is insisting that the automaker is not “starting a price war”:

We’re not “starting a price war”, we’re just lowering prices to enable affordability at scale.

But historically, Tesla has sold vehicles for whatever buyers have been willing to pay. In 2020 and 2021, Tesla increased prices, and while it was partly due to cost increases, the automaker’s gross margins also greatly increased during that time.

Tesla’s industry-leading gross margin is going to be tested this week as the automaker is expected to release its Q1 results on Wednesday. Investors are going to be looking at how big of a hit the gross margin has taken with the first wave of price cuts.

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