This domino effect spells out doomsday for suppliers, but why all this will be a good thing for American consumers, blame it on the inflation reduction act or IRA. For short, last August 2022, the Biden Administration approved the 437 billion dollar act by the way, if you havent seen my video on how and why the government is pushing us to Electrify check it out now. Basically, the U.S incentivized car makers and Americans to Electrify by offering a 7 500 tax credit towards the purchase of certain electric vehicles, electric passenger cars under 55, grand and electric SUVs trucks and vans under eighty thousand dollars qualified. But one of the problems with the regulation was how it defined an SUV reason is the IRS that was defined in it was using old standards. For example, Tesla said the model y was an SUV and since it was priced to 65 990, it should have qualified for the tax credit. But in the irss opinion it was an electric passenger car which has a lower price cap of 55 grand and therefore said the model y was ineligible, Teslas hands were taught a child has to shock the industry by lowering the price of the model y to nearly Fifty three thousand dollars it thereby made it eligible for the tax credit soon after Ford followed suit and lowered its Mustang Mach e, its cut range between 600 to 5900, so the new starting price range between forty six thousand and sixty four thousand dollars, depending on the Trim Ford acknowledged it did this to stay competitive, even though it meant that some of the Machi trims wouldnt be profitable on a per unit basis.

In other words, Ford was willing to take a loss on their own dime just to compete. This is the beginning of a price War Ill tell you hell, get hurt real bad, its the U.S startups Im talking about startups like rivien and Lucid theyre, already losing money as it is, so a price war will make it even harder for them to grab market Share, especially during this time of high inflation and high interest rates, you can see that lucid is already on the edge. Lucid is the luxury Market, its cars are expensive and most Americans cant afford them as it is. In fact, cars exceeded the maximum price threshold. To be eligible for the federal tax credit to lose an air Turing, for example, retails at 107 400 and a base model now thats pretty much double the 55 000 price gambled by the inflation reduction act for passenger cars. Just forget about the air Grand Touring, which starts at 138 thousand dollars anyway, soon after Tesla Imports slashed their prices, Lucid came forth and offered to give customers a 7 500 credit on certain variants of the Lucid air, basically its like a 7 500 discount funny enough. Just a week, or so after Tesla and Ford, slash prices, the IRS updated and broadened its definition and standards for the federal tax, credit for SUVs and thats. How the model y only just recently became eligible as an SUV for the federal tax credit in response a week or so after Tesla raised up the price of the model y yet again.

Well this time the price increase wasnt as big as a price cut. Nevertheless, its funny how volatile EB prices are getting even more than ever before, its almost like stock market now with the daily up and downs. Overall, though, this is good news for Americans, I mean how the model Y is cheaper than its original price, and on top of that, you get the tax credit, but it also benefits Tesla heres the thing almost immediately thats the Tesla price Cuts were announced. The model y became the second most researched vehicle in America just the week before it was the 70th most researched vehicle talk about a big leap. Obviously, the price Cuts peaked. Consumer interest. Ford also saw a positive impact on its own brand. Soon, after its price cut, Ford, customers commented that they appreciated for its decision to reimburse them for the price differences on the Marquis. So where do we go from here? Did Tesla ignited price war, or will this awesome dissipate and die down? Actually, not all car makers are on board to join the price War. Take Volkswagen, for example, CEO Oliver Bloom says that Volkswagen has a clear pricing strategy and its not leveraging prices rather its focusing on its reputation. He also said that Volkswagens goal of being a global EV leader should be achieved through profitable growth. Even more surprising is Ford. So far, Ford hasnt announced a price cut on the F 150 Lightning Electric truck – my guess is probably its so popular in high demand that Ford doesnt need to lower the price.

Despite the fact that Ford U.S cut the price of its Mustang Mach e lineup for it across the pond in Europe, says it wont cut prices, for example, Ford. France says the Machi price Cuts were only specific to the North American market and it plans to keep the Machi price stable in France, and, if that are the Ford plans for France. Well, Ford, customers in Europe should probably expect the makis price to remain steady and other European countries too. In a way that makes sense for Ford Europe not to follow toward North America reason is Florida is able to deliver the Mustang Machias in France in a shorter time and in the majority of configurations plus Fords largest European markets are in the UK and Germany by The way, speaking of France, another EV maker, who says they wont be joining the price war, is Renault believe it or not. The Renault Megan E Tech outsold, the Tesla Model 3 in Europe last September. So when I was a bigger competitor in the EV game than most people realize basically Renault believes that most car makers wont match Teslas discounts because they cant afford to as it is. The profit margin is already pretty tight for mainstream EVS, whereas Tesla is a luxury brand and it can afford the slash prize. Then there are car makers who havent commented on whether theyll cut prices, but they said its not completely off the table. Take GM, for example.

Ceo Mary Barra said in an earnings call. The GM vehicles are priced where they need to be at the moment, but she did say that GM is monitoring the market to make sure that it remains competitive at any rate supply chain. Suppliers are also on edge because an EV price war will impact them directly. Look at Tesla suppliers, for example, word on the street is a Tesla. Suppliers have already started bracing themselves, anticipating pressure to cut the prices themselves, Teslas Chief Financial Officer, Zach Kirkland, said the Tesla. Will attack every cost, including the supply chain? Actually, these arent just Rumors in China, One suppliers said Teslas targeting cutting costs by 10 to keep up with the competition for now theres. No concrete news from Tesla suppliers like battery makers, Panasonic cattle or LG energy, but I say thats, probably because of confidentiality agreements now putting pressure on suppliers is nothing new. One on named Tesla executive said that during the pandemic, thats the focus more on delivery and less on price. Apparently Tesla was even willing to pay more to get parts faster, but now the Tesla prices have been lowered. It wouldnt be a surprise if Tesla may add pressure on its suppliers but heres the problem as it is. A lot of suppliers are struggling financially and they might not be able to handle all added pressure from desna. According to one study, car Makers profit margin to almost three percentage points higher than suppliers in the third quarter of last year.

Look at what happened to one supplier that has Tesla is one of its biggest customers Im talking about gisting North America last year, juicing filed for bankruptcy that came down partly to high commodity prices and high labor costs point is. Suppliers are already tight squeeze, but now lets look at rivian. It has some 14 000 employees, or rather they had. Fourteen thousand a few weeks ago, rivian announced its laying off six percent of its Workforce, Now mind you this isnt its first layoff last year. The company also laid six percent off. This is an EV maker that had one of the biggest IPOs of 2021, but the companys been struggling since then to meet its targets due to manufacturing and supply chain problems following cash reserves and a weak economy. This latest measure is one of its ways to reach profitability. Right now, rivien is folks seen on upping production of its R1 trucks and edv delivery. Vans have built for Amazon its also supplying the smaller R2 vehicle platform like most of the younger brands in the EV Market. A price war is the last thing it needs. Caribbean has seen that stock plumbed over 75 percent over the course of the year after they went public rivian cant afford to cut prices like Tesla and so its rethinking its expansion Plans by the end of last September, rivian had about 13.8 billion in cash remaining. That might not sound so bad, but actually it is in the first three quarters of 2020 to rivian reported losses of 5 billion dollars and rivian also said it narrowly missed its full year Target of producing 25 000 Vehicles last year.

If this trend continues, rivian will bleed on all his cash long before the internal combustion engine ban gets enforced and the EV Market really takes off. The thing is rivians problem: isnt Consumer demand rather its having problems on the supply side and with production. Actually, last year, rivian bumped up its prices by 20 percent. Well, that Senate stock price is tumbling and CEO RJ skaringe ended up issuing a public apology anyway, whether a price War started or whether it will die down. Only time will tell for now its good news for you as a consumer honestly right now, its one of the best times to buy an EV newer used, because for the first time since November 2021, the average used EV on the market is now below 50 Grand And if the price work continues, prices should drop even further. The irony is in recent times, car prices have been on the rise right now to get your hands on a new car youre, looking at an average sticker price of almost 50 Grand thats. Why some analysts, like more car makers, will likely follow with their own price Cuts? They might not outright say that Tesla is the reason for their price Cuts, but they cant deny that Tesla has brought on the pressure right now. Major car brands are betting big on electrification this year, even more battery electric cars will join the market. The Ed Market is booming and car Giants are trying to win new customers as fast as possible reason is.

Loyalty is King in the car industry. Once you convert a consumer from a combustion engine to an electric car, youll likely keep them for decades to come, thats. Why now is the time to grab market share? I tell you this year, 2023 will be a pivotal year for the EV industry, but now you tell me Well an EV price War move you to buy an AV. Please share by commenting below.