Volkswagen’s CEO Oliver Blume has finally admitted that its range of electric vehicles is inferior and unaffordable compared to Tesla’s product offering. Nevertheless, Blume wants to turn VW into a global EV leader which is better said than done. Tesla recently implemented a price cut across its EV model range. VW is yet to respond with a price cut of its own. In reality, VW is unable to afford a price across its range of inferior EV model offerings because it is yet to reach an economy of scale to factor in a price cut.
Because VW entered the EV race rather late, it will take a few years before a price cut is implemented, if at all. However, Blume hid behind a pricing strategy that is focused on delivering reliability and profitable growth. Words designed to ease the fears of investors, yet no mention of improved efficiency to match or beat Tesla in the interim.
The simple fact is VW’s current crop of EVs are inferior to what Tesla offers and this alone gives Tesla yet another advantage over the one it already has. Tesla cut prices by between 10 and 20 percent on the Model 3 and Model Y. It is estimated that Tesla makes a 40 percent profit on each car sold.
As a comparison, VW is lucky to make 5 percent on each car it makes and sells. Tesla’s recent price cut comes amidst rising inflation. Indeed, Tesla could enact further price cuts and still be substantially more profitable than any other car manufacturer on the planet.
To rubber-stamp Tesla’s current EV domination, the Model 3 and Model Y were the best-selling cars in Germany in December 2022. Tesla is also experiencing a sharp rise in demand in China due to the recent price cut.