According to a recent UBS research, global auto production will likely outpace sales this year by 6%, creating an excess of 5 million vehicles that will need price reductions to move off of lots. Automakers are gearing up for a pricing war, and some electric vehicle manufacturers are already lowering costs, even if those price reductions might not take place until the second half of 2023.
“Given the bullish production schedules, we see high risk of overproduction and growing pricing pressure as a result,” UBS wrote in a note to clients. The pricing battle has already begun in the EV space, and in the second half of 2023, we anticipate it to spread to the combustion engine category as well.
The researchers predicted that luxury carmakers would fare better than family car manufacturers in the event of price cutbacks.
According to Yahoo Finance, the combination of rising energy costs and expensive pricing that are out of reach for many consumers might have a significant negative impact for EV manufacturers. Tesla cut the cost of its vehicles by up to £8,000 in the UK in January. Some of its more affordable versions are currently in the same price range as popular names like Kia.
According to the website of Proactive Investors, Ford Motor Company and Lucid are two more automakers who have responded to Tesla’s pricing decreases by cutting their own EV costs.
There is proof that auto prices have already decreased across all segments. According to the most recent Cox Automotive data, which was made public on Friday, April 7, wholesale used-vehicle prices decreased 2.4% from a year earlier in March but increased 1.5% from the month before.
According to a Kelley Blue Book survey dated March 23, new vehicle prices have fallen for three consecutive months, and “it’s starting to look like a sustained trend.” Prices are however still “historically high.”