Inside the industry: Do Tesla's price cuts push it into the mainstream?

A shiver went down the spine of automotive’s mainstream earlier this month when, in the wake of yet more headline price cuts, Elon Musk alluded that he was prepared to slice away at Tesla’s profit margins to boost volumes, in the expectation of income from everything from subscriptions to add-ons – driver assistance tech, extra performance packages and more – compensating.

Cutting car prices at a time everyone else is raising theirs is a hell of a gamble. It’s the antithesis of automotive common sense in so many ways, risking everything from brand exclusivity to residual values. But this is Musk, so you know that he will double down on the strategy – and that he has more chance than anyone else of making going against the grain work.

It’s too early to conclude the full impact of his cuts (beyond perhaps the fact that they indicate Tesla’s supply is out of whack with its demand). But so far, the most evident consequence is that the Model 3 is falling into the budgets of ever more buyers. Once a rival for the likes of Audi, BMW and Mercedes-Benz, Tesla is suddenly competing – and in many cases beating – some of the biggest middle-market players on price.

The Model 3 now starts at £42,990 in the UK, and there are plenty of electric cars from Ford, Renault, Vauxhall et al that cost more. In fact, according to the latest What Car? Target Price data, the mean average price of a new car in the UK is now £48,795 and the median average is £41,375. In such a market, nobody can argue that Tesla isn’t operating in the very heart of the mainstream.

In recent weeks, Renault CEO Luca de Meo and Ford president Jim Farley have signalled mild alarm that Tesla is taking aim at them. Investors have responded too, wobbling share prices. In common with much of the industry, both Renault and Ford have enjoyed the breathing space and profits afforded by demand outstripping supply in the Covid-hit world. It’s one thing having unknown Chinese brands trying to steal your lunch but now quite another to have an ultra-desirable premium rival push down with a devil-may-care attitude.