Proactive Investors - Last month, almost more than three quarters of electric vehicles (EVs) were sold at a discount in the UK, with the price war expected to intensify due to a an increasing oversupply of new models.
The price cuts announced by Tesla Inc (NASDAQ:TSLA) over the weekend are typical of the reaction from Western carmakers to the aggressive pricing from Chinese rivals.
Today, China's state planning department said it expects the EV price war to intensify this year as more than 110 new models are launched and planned supply exceeds predicted demand.
The National Development and Reform Commission estimated that demand for EVs and plug-in hybrids will to grow 2.1 million units this year, while the top three brands alone, BYD, Aito and Li Auto (NASDAQ:LI) are planning a 2.3 million increase in deliveries for 2024.
Last month, 77% of new EVs in the UK were sold at a discount, with the average price reduction now at a record 11%, according to the latest data from AutoTrader, compared to 55% of sales at a discount in the same month last year.
Since September 2022, average prices for premium EVs have fallen from almost £52,000 to just over £35,000, according to the AutoTrader retail price index, while for non-premium EVs the average price has declined from £28,000 to £21,000.
However, European Union data last week showed registrations of new battery EVs fell 11.3% year on year, part of a wider trend of declining demand for cars last month.
Last month, BYD’s most affordable EV, the Seagull hatchback (pictured), was cut to an equivalent price of just under US$10,000, more than US$50,000 below the average price of an EV in America.
In the UK, the introduction of zero emissions vehicle mandates requires 22% of all new cars sold by major manufacturers to be electric by 2024, a target increasing annually until a complete ban on petrol and diesel vehicles in 2035.
Ian Plummer, commercial director of Auto Trader, highlighted the challenges, "Sales of electric vehicles are rising but growth is driven from the fleet side. More needs to be done to stimulate demand among private buyers where affordability remains a barrier. The trend of heavy discounting looks set to accelerate as manufacturers struggle to meet these new mandates."
Auto Traders agreed that the introduction of more affordable Chinese models this year could further intensify competition and lower prices, potentially benefiting UK consumers.