Elon Musk’s Tesla kicked off a pricing war in the electric vehicle industry in January when the company announced the first in an ongoing series of price cuts for its models worldwide. But at least one major carmaker isn’t getting drawn into the drama, even if it means almost guaranteed losses in the short term. Renault, one of France’s largest automakers, is officially stepping away from Tesla’s pricing battle unlike other legacy car companies such as Ford, according to Thierry Piéton, the Renault Group’s chief financial officer.
“There is no big incentive to go and cut the prices,” Piéton said during the company’s first quarter earnings call Thursday, adding that Renault doesn’t want to “go into a spiral that some of our competition is following.”
Including the first January price cut, Tesla has slashed prices in key markets six times this year, with the last cut coming earlier this week in anticipation of the company’s earnings call on Wednesday. Tesla missed its sales delivery estimates last year as a result of slowing demand, rising interest rates, and increased competition in the space from fellow EV companies as well as traditional automakers entering the mix, and the price cuts are designed to help Tesla retain its market share.
But the price cuts are starting to weigh on Tesla, as they contributed to the 24% drop in net income the company reported for the first quarter on Wednesday. Musk defended Tesla’s approach during the earnings call, saying that higher sales and maintaining a large cut of the EV market share were a priority even if it meant losing revenue.
“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here, versus a lower volume and a higher margin,” he said.
While Tesla price cuts could make the brand more accessible to average buyers, possibly remedying one of the company’s biggest limitations in recent years, investors have been far from enthralled with the approach, with some questioning whether the company grew too fast over the past decade. It’s the latest sign Tesla investors are worried about Musk’s leadership at the company, with some complaining the CEO has become too distracted with Twitter since purchasing the company late last year.
But while Musk’s plan to keep Tesla competitive hinges on bigger sales numbers and reduced profits, companies like Renault are taking the opposite approach. “If it results in the short term in slightly lower volumes, so be it,” Piéton said Thursday of the company’s decision to forgo price cuts.
When Tesla began its price cuts in January, analysts said the impact could amount to a major shift in the young EV market by making the vehicles more affordable for the average consumer. But legacy carmakers such as General Motors and Honda are already moving forward with plans for cheaper EVs, and, like Renault, a few have so far stayed away from price cuts on their existing models.
GM, BMW, Mercedes-Benz, and Volkswagen have announced that they are not currently considering global EV price cuts despite Tesla’s moves, but that could change depending on market conditions. Mercedes cut its EV prices in China last year as demand in the country stalled, and analysts have warned that if Tesla’s price cuts succeed in the long run, legacy carmakers may have no choice but follow suit.