I put together a list of the key ideas that drive a lot of my thinking on my website this morning.
One of those ideas, “Pricing Power”.
Electric vehicles are running into the challenge of maintaining pricing power right now.
The challenges in maintaining pricing power right now:
- A price war, started by Tesla and Elon Musk’s unwillingness to try normal brand building and advertising activities as a way to keep the perceived value of a Tesla high. Along with all of his antics with Twitter.
- Infrastructure issues: people have heard horror stories and challenges about driving electric, especially for non-Teslas.
- Still misinformation about renewable energy, climate science, and range.
Does a discount help solve this?
Short answer: no.
- Price wars can only have one winner.
- Discounts don’t create demand, but pull demand forward. Leaving a hole in the short term from the sales that would have happened at full price anyway and a hole where there isn’t new demand. (In other words, discounts create volatility.)
- Price has nothing to do with the concerns about range, charging, infrastructure, the science, or any other objections. If someone has concerns about an EV, price isn’t going to fix it.
Is there a path forward:
- Long term: better charging infrastructure and more accessibility of charging will help.
- Mid term: more choices of EVs. Not everyone wants a Tesla. Not everyone wants a VOLT. The more options, the more likely there will be a solution that someone will like.
- Short term: brand building. Make the cars seem sexy, reliable, advanced but safe, and like an obvious choice. Control the frame and the perception.
What’s this mean for you?
- You create demand by managing the perception of your business and the problem you solve, not with price.
- Price creates a volatile market and not one with pricing power.
- Price is usually an easy objection to throw out, but look for the deeper reason.
Join our Slack channel and let me know what you think when you think about pricing power.