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VW will sit out Tesla's EV price war

Volkswagen's upcoming ID.7 electric sedan (image: VW)
Volkswagen's upcoming ID.7 electric sedan (image: VW)
Volkswagen sees its main competitors in the electric vehicle market emerging from China, just as Elon Musk noted during the Q4 conference call with investors. VW won't participate in the EV price war that Tesla started, confirmed its CEO Oliver Blume, as it has 'trust in the strength of our products and brands.'

After dropping its vehicles' prices in China, Tesla drastically cut them in the US, Europe, Australia and several other regions, too. In some cases, Tesla's price reduction was more than 30% when accounting for the government subsidies that some model trims became eligible for. As reasoning for the price cuts, Tesla cited decreased production costs and making more of its cars eligible for the federal tax credits, rather than softening demand.

Given the economies of scale and manufacturing efficiencies that only Tesla and a few Chinese automakers can currently pull off, its price cuts put the fledgling EV industry in a bind. A number of brands lowered the prices of their electric vehicles almost immediately after Tesla in order to have a fighting chance in the market. Not VW, though, as, according to Volkswagen's CEO Oliver Blume:

We have a clear pricing strategy and rely on reliability. We trust in the strength of our products and brands. The goal is not size at any price. For me, our ambitions are about meaning and added value, about profitable growth.

This statement comes despite the fact that in Germany Tesla lowered the price of its bestselling RWD Model Y by 17%. That's before the €6,750 in government subsidies there for which the SUV now qualifies, lowering its starting price to just €41,370, down from €53,990 a few short weeks ago. The base RWD VW ID.4 crossover starts from about €46,335 before the federal subsidies there, but it is smaller and offers less range than the Model Y.

Just as Elon Musk, VW sees its main competitors emerging from China. According to one of its high profile managers, "what we have been discussing here in Europe for years, the Chinese are building within months," as they add that Volkswagen has "some catching up to do," while the CEO Blume will be traveling to China this week to see how his company can increase its share of the lucrative EV market there.

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Daniel Zlatev, 2023-01-30 (Update: 2023-01-30)