At a time when prices seem to be rising on just about everything it’s great to be able to report a bit of good news for a change: Tesla has cut the price of its new vehicles by as much as 20 per cent in the US.
It’s a move that will be warmly welcomed by electric vehicle buyers because it’s started a price war that will put downward pressure on prices across the board.
Now I know what you’re thinking: Yeehah! Right? Well perhaps not if you already own a Tesla, because you’ve just seen the value of your existing vehicle fall, which won’t be a nice feeling at all.
But for the rest of us who’ve had our eye on a new electric vehicle for some time but have been put off by those high prices it’s unequivocally good news.
What’s enabled Tesla to cut its prices so dramatically is the high profit it extracts from each car that rolls out of its factories. It leads the market in that regard.
Tesla has invested heavily in the development and production of batteries, which has helped to drive down costs across the industry.
But it’s also brought battery production in-house, standardised many of its vehicle designs and invested in new manufacturing techniques like using large castings to replace small metal parts.
Tesla’s not the only player in the EV game of course, and Chinese manufacturers like MG are also playing a big role in reducing EV prices.
There are a few factors at play here.
Firstly, the cost of batteries, which are one of the most expensive components of EVs, has been decreasing rapidly. This is due to advancements in battery technology and an increase in production capacity, which has led to economies of scale.
Secondly, many governments around the world, including ours, are offering incentives to encourage the adoption of EVs, such as tax credits and rebates. These incentives can help offset the higher purchase price of EVs.
Thirdly, there’s increased competition with more and more automakers enter the EV market, helping to drive down prices.
Finally with more manufacturers producing EVs, economies of scale are getting better, allowing for more efficient manufacturing process, which lowers prices.
At the time of writing, the cheapest EV in Australia was the BYD Atto 3, but that might soon be undercut by the MG 4 which is expected to arrive in the early part of this year.
The competition at the bottom of the EV market is starting to hot up and it’s not just the Chinese who are competing for market share.
Fiat is expected to introduce its 500e to our shores at a price between $40-45,000 joining the BYD Dolphin, the MG 4, and the curiously named Ora Good Cat. Where do Chinese carmakers get these names from?
Price pressure for new EVs is seeing the price of used vehicles come down as well, and when used fleet EVs start coming onto the market in some numbers we should see those prices heading further south.
Prices on used Teslas are now starting to dip below the $50,000 mark, that may not seem exactly like a bargain, but it’s a lot lower than just a few months ago. While the purchase price of EVs may still be higher than a comparable internal combustion vehicle getting one on a novated lease is now a lot more tempting.
Electric vehicles are now exempt from FBT for all cars below the luxury car threshold of $84,916.
On top of that the five per cent import tariff has also gone, as has the GST when it’s purchased. Then there’s the lower running costs of an EV.
As for the warm inner glow that comes with the knowledge that you’re driving a zero emission vehicle, well that’s priceless.
It all adds up to make novated leases on electric vehicles a smart move, so if it’s time you started saving money and the planet, contact Fleetcare today on 134 333.