It's an ‘all-out Game of Thrones battle’ for Tesla

Tesla TSLA +3.26% has contributed to a significant drop in the price of electric vehicles. While that's great news for car buyers, it's not so great news for automakers' profits, even if they are regarded as secondary right now. Market share needs to be protected by car manufacturers to remain competitive.

‍

Tesla (ticker: TSLA) started rolling out its price reductions early in January of this year. It has been reported that the price of its Model Y crossover vehicle, the most popular EV in the U.S., has fallen by up to $13,000 since last year. The new Mach-E price cut was announced by Ford Motor, which followed suit on Monday, by reducing prices by as much as $4,900 on its model.

‍

Tesla is uniquely positioned in the EV arms race in terms of scale, brand, battery technology, and Musk's DNA. In contrast, others are aggressively competing for market share,” Wedbush analyst Dan Ives wrote following Ford's cuts in a report on Monday. “Ford and GM will have to sacrifice margins to gain increased volumes at a crucial. “The 313 area code bets on EV growth in the future." Lose EV customers on price." Ford and we believe GM will have to sacrifice margins to gain increased volumes at a crucial time. In a nutshell, they are not going to

‍

Detroit's area code is 313.

‍

Ford and General Motors both have big plans for electric vehicles. In the middle of this decade, both companies hope to sell around 2 million electric vehicles a year. Their goals are to take over a majority share of the overall market from other automakers while maintaining the existing gasoline-powered car business that they already have.

‍

It seems that GM is not cutting prices at the moment. It was announced Tuesday that the company's EVs are priced appropriately and demand for them is strong. That makes sense in a way. In addition, GM already offers some of the most affordable electric vehicles on the market today. For instance, a Chevy Bolt's starting price starts at about $27,000, while a Model Y's starting price is about $53,000, while the Mach-E's starting price is about $46,000.

‍

One of the major factors contributing to the pressure on automakers to cut prices might be the fact that they do not qualify for the $7,500 tax credit enacted as part of the Inflation Reduction Act. Among other requirements that must be met for these EVs to be eligible under the law, include being assembled in North America. Many EVs are not included in this category, including some manufactured by Hyundai Motor (005380. Korea), Kia (000270. Korea), Polestar Automotive (PSNY) as well as Audi.

‍

Starting at about $70,000, an Audi e-Tron is much more expensive than a comparable Model Y.

‍

According to news outlet Teslarati, Tesla is upping the ante on EV affordability again by offering Tesla owners a $3,000 discount or free supercharging for three years if they trade in their vehicles for a new Tesla.

‍

In response to a request for comment, Tesla did not respond.

‍

Since Elon Musk's company makes more money by selling EVs than by selling conventional cars, it can afford to put pressure on its rivals. It is estimated that Tesla will generate an operating profit margin 2022 of more than 16%. GM generated a 9.3% operating-profit margin in 2022. Ford’s margin is expected to be about 7% for 2022.

‍

On Thursday, Ford releases its fourth-quarter results.

‍

Investing community applauds Tesla's pricing reduction. In comparison to the Nasdaq CompositeCOMP +0.98%, the stock has increased by nearly 51% since Jan. 5, when it reduced vehicle pricing in China.

‍

The reaction from Ford investors has not been as positive. Despite the market being poor that day, with the S&P 500 plunging 1.3%, shares fell 2.8% on Monday when the price cuts were disclosed.

‍

GM stock is up over 8%, while Ford stock is up 4% in early trade on Tuesday, perhaps helped by the company's good fourth-quarter earnings.