Lost your password?
Don't have an account? Sign Up

Volkswagen and BMW Respond to Tesla’s Price War

EV price cuts as a reaction to Tesla’s action  

Volkswagen and BMW talked up their ability to compete with electric-vehicle giants Tesla and BYD on Thursday. BMW stands a better chance of living up to its promises.

Tweet on VW and BMW price cuts

WSJ news on price cuts reaction to Tesla

First-quarter results from both German automakers were strong, but BMW had the distinction of seeing a positive share-price reaction. Expectation-beating earnings combined with cautious guidance from the likes of GM and Ford prompted selloffs, as investors worry that higher vehicle prices and profits now imply bigger falls later this year.

BMW reported an operating margin of 12.1% in its core manufacturing business, well ahead of full-year guidance of 8% to 10%. It said it was too early to think about an upgrade, but some investors appeared to see potential for it to do better than forecast, with the shares rising more than 2% in early trading before falling back slightly. The company typically errs on the side of caution in its guidance.

An emerging price war in electric vehicles led by Tesla is one reason investors see the current profitability of automakers as unsustainable. The problem is most acute in China, a critical market for both VW and BMW.

It announced a €1 billion investment in a new center of innovation for connected cars.

Meanwhile, BMW bosses on a media call ruled out headline price cuts in China, even if dealers are having to offer big discounts.

Only consumers win a price war, but the Bavarian company’s focus on the upper end of the market should bring some protection.


Image: Bmw