While price cuts are not new in the automotive world, they are for Tesla. The company, which historically has been unable to keep up with demand, has seen its order backlog shrink from 476,000 units in July 2022, to 74,000 in December 2022. This has been attributed to Tesla’s robust production growth, which saw 2022 production increase 41% over 2021 (from 930,422 to 1,313,851 units). With the days of “endless” demand seemingly over, Tesla is going on the offensive by reducing its prices—a move that puts pressure on competitors, but has also angered existing owners.
Cranking up the Heat
Tesla’s price cuts are an attempt to protect its market share, but they’re not exactly the desperation move some media outlets have claimed them to be. Recent data compiled by Reuters shows that Tesla’s margins are significantly higher than those of its rivals, both in terms of gross and net profit. Our graphic only illustrates the net figures, but gross profits are also included in the table below. Data from Q3 2022 Price cutting has its drawbacks, but one could argue that the benefits for Tesla are worth it based on this data—especially in a critical market like China. In the case of Chinese EV startups Xpeng and Nio, net profits are non-existent, meaning it’s unlikely they’ll be able to match Tesla’s reductions in price. Both firms have reported year-on-year sales declines in January. As for Tesla, Chinese media outlets have claimed that the firm received 30,000 orders within three days of its price cut announcement. Note that this hasn’t been officially confirmed by anyone within the company.
Tit for Tat
Ford made headlines recently for announcing its own price cuts on the Mustang Mach-E electric SUV. The model is a direct competitor to Tesla’s best-selling Model Y. Chevrolet and Hyundai have also adjusted some of their EV prices in recent months, as listed in the following table. Source: Observer (Feb 2023) Volkswagen is a noteworthy player missing from this table. The company has been gaining ground on Tesla, especially in the European market. This decision could hamper Volkswagen’s goal of becoming a dominant player in EVs, especially if more automakers join Tesla in cutting prices. For now, Tesla still holds a strong grip on the US market.
Thanks, Elon
Recent Tesla buyers became outraged when the company announced it would be slashing prices on its cars. In China, buyers even staged protests at Tesla stores and delivery centers. Recent buyers not only missed out on a better price, but their cars have effectively depreciated by the amount of the cut. This is a bitter turn of events, given Musk’s 2019 claims that a Tesla would be an appreciating asset. These comments were made in reference to Tesla’s full self-driving (FSD) capabilities, which Elon claimed would enable owners to turn their cars into robotaxis. on These faulty airbags, installed by 19 different automakers including BMW and Toyota from 2002 to 2015, can explode when deployed and have led to numerous tragic accidents. Their recall affected 67 million airbags (including Honda’s vehicles above) and has been known as the largest safety recall in U.S. history. Over the past four decades, there have been over 22,000 automobile recalls in the United States. In this interactive piece, Chimdi Nwosu uses data from the National Highway Traffic Safety Administration to visualize the types of automobile recalls over the past 40 years, the companies with the most recalls, the components that were recalled the most, and, most importantly, their impacts on people.
Breaking Down U.S. Automobile Recalls
Whether a recall affects specific vehicle components, equipment, or vehicles as a whole, it affects the lives of millions of automobile users. When combined, these numbers ramp up exponentially. The U.S. alone has seen a total of 22,651 recalls over the past 40 years, impacting more than one billion people. Almost 72% of these people were affected by nearly 20,000 vehicle recalls, while around 19% were impacted by over 2,000 equipment recalls during this period. Comparatively, the 442 tire recalls and 220 child seat recalls affected significantly less, but still a total of 96.9 million people. While an inconvenience to many, the recall of these faulty vehicle parts saves many more from unfortunate incidents that may have occurred if left unchecked.
Minor and Major Recalls
One of the largest recalls in history took place in 2014 when General Motors—the manufacturer with the highest total of recalls in four decades—recalled millions of vehicles including the 2005-2007 Chevrolet Cobalt, 2007 Pontiac G5, and 2006-2007 Chevrolet HHR, amongst others. The reason for this recall was a faulty ignition switch that caused the vehicle’s engine to shut down while driving, disabling safety systems including airbags. This fault led to the death of hundreds of people. However, not all recalls are this severe. BMW, for example, recalled just four vehicles in December last year because one of the four bolts in the driver’s backrest was not attached properly. Similarly in 2020, Ford recalled some of its vehicles due to a faulty door latch. While this recall inconvenienced over two million users, it was less likely to lead to severe consequences if left unchecked.
A Safer Future?
The number of automobile recalls over the past four decades has seen a steep rise. As have car safety standards. While recalls could hint at the risks involved in taking your car out for a drive, they also indicate manufacturers taking responsibility for their faulty commodities, and affect a very small percentage of vehicles on the road. To improve automobile safety, the NHTSA proposed a New Car Assessment Program in 2022, which provides vehicle users with safety ratings for every new vehicle. This five-star safety rating program rates the vehicles’ safety features, crashworthiness, and resistance to rollover. With self-driving cars now also entering the mix, we need to stay informed about vehicle safety to keep our vehicles, our streets, and ourselves safe in the future.
