Friday, August 22, 2025

EV Price War Likely To Intensify, Fueled by Aggressive Spending Plans

The price war that Tesla, Inc. (NASDAQ: TSLA) initiated two months ago in the electric vehicle (EV) industry is raging. Tesla has implemented two rounds of price cuts. Several Chinese carmakers have followed suit, and some U.S. EV manufacturers including Lucid Group, Inc. (NASDAQ: LCID) and Ford Motor Company (NYSE: F), on its Mustang Mach-E electric SUV, have felt compelled to reduce prices as well. 

Other EV producers such as General Motors (NYSE: GM), Volkswagen, and Rivian Automotive, Inc. (NASDAQ: RIVN) have decided to hold the line and not (yet?) offer discounts to buyers.

At the same time, legacy auto makers Volkswagen and BMW, which are looking to become major players in EVs, this week announced giant planned capital expenditures in 2023, much of which are earmarked for EVs. Volkswagen plans to spend 180 billion euros on combined capex and R&D expenses over the five year-period 2023-2027, two-thirds of it on electric and digital technologies. Total spending in 2023 alone could be around 45 billion euros. In addition, BMW announced an aggregate 2023 capex and R&D spending goal in the vicinity of 15 billion euros.

READ: Volkswagen to Build First North American EV Battery Factory in Ontario

To put into perspective the magnitude of planned spending by just these two automakers, particularly Volkswagen, consider the spending patterns of GM and Tesla. GM announced in mid-2021 that it planned to spend US$35 billion through 2025 to develop a fleet of electric and autonomous driving vehicles. At the time, GM’s US$35 billion five-year goal was considered quite large. Tesla has budgeted US$6-US$8 billion for capital expenditures in 2023 and US$7-US$9 billion per year in 2024 and 2025.

The result of all this spending should be the introduction of many new, high-quality EVs models, but the environment is likely to be extraordinarily competitive, with many automakers fighting for market share so they can recover their enormous EV investments. This backdrop sounds like a prescription for the current EV price war not only to continue, but to expand.

READ: Rivian’s Giant Cash Burn Expected To Continue Through At Least 2023

Few price wars in any industry have resulted in positive shareholder returns for any participants aside from the financially strongest, best positioned companies. As such, Tesla and deep-pocketed legacy auto producers like Volkswagen may potentially fare well, but it seems difficult to be optimistic long term for startup EV makers like Lucid and Rivian.

LUCID GROUP, INC.Reservation Data

DateNumber of Lucid Air Reservations (A)
21-Feb-23> 28,000
7-Nov-22> 34,000
3-Sep-22> 37,000
5-May-22> 30,000
29-Feb-22> 25,000
15-Nov-21> 17,000
(A) All reservation figures above exclude purchase commitments of up to 100,000 vehicles by the Government of Saudi Arabia.

More specifically, the price cuts implemented by industry-leader Tesla represents confirmation of some degree of the waning demand for EVs. Note the marked decline in reservations, shown above, for the high-priced Lucid Air model over the last six months. Cash-burning Lucid and Rivian seem certain to be forced to cut prices in this increasingly competitive environment, depriving them of much needed incremental cash to offset huge start-up costs.


Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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