Fleet operators are fed up
Has Tesla overreached in the price war?
By Diana Dittmer
February 6, 2024, 6:16 p.m
Listen to article
This audio version was artificially generated. More info | Send feedback
After Sixt and Hertz, SAP also wants to do without Tesla electric cars in its vehicle fleet in the future. As justification, the software company points to difficult delivery conditions, but also to the consequences of the US car manufacturer’s aggressive pricing policy.
Tesla has a serious problem with major customers: After Hertz and Sixt, the Walldorf-based software group SAP now also wants to remove the e-car pioneer from its list of suppliers for its company cars. According to “Handelsblatt”, the fleet consists of a total of 29,000 vehicles. A serious loss in times when the electric car market is becoming increasingly competitive. According to experts, the US car manufacturer is being presented with the receipt for a price war that it initiated itself.
SAP justified the expulsion, among other things, with the car manufacturer’s unstable prices. It is said that Tesla’s price dumping will also affect the resale value of electric cars. This applies to Tesla more than to other car manufacturers: “The list prices fluctuate more at Tesla than at other manufacturers,” the paper quotes SAP fleet manager Steffen Krautwasser. This makes planning more difficult and poses a higher risk for the company.
Tesla’s delivery conditions were also suboptimal for SAP, writes the “Handelsblatt”. The car manufacturer often delivers vehicles too early, which causes logistical problems given the quantities the company purchases. In the event of problems, there are no permanent contact persons or “key account managers”, as is the case with other car manufacturers.
However, the main reason for the removal was probably the decline in the value of the fleet. The so-called residual value is an important factor for car owners. Due to falling sales figures, Tesla has repeatedly reduced prices over the past twelve months. The competition responded with discounts, which set off a price spiral. According to figures from the industry service Dataforce, which the “Handelsblatt” quotes, Tesla is now losing ground in an important business area.
Tesla is popular as a company car, but not with large fleet providers. The share here last year was just 3,450 vehicles. This corresponds to a market share of just over one percent. According to “Handelsblatt”, the numbers look better for self-employed people and companies with fleets of up to ten vehicles. By selling to individuals or small fleet operators in Germany, the US car manufacturer was able to increase its company car sales last year by a whopping 54 percent to a total of 24,600 vehicles. That corresponds to a market share of almost four percent.
“That’s a pretty decent increase,” as Benjamin Kibies from Dataforce comments. But the analyst adds: “The hard currency is to make progress across all fleet sizes.” Tesla therefore “did itself a disservice with the sudden price reductions.”
More company vehicles than private vehicles
Company cars are a billion dollar business. Last year, around 977,000, more company vehicles than private vehicles were registered in Germany for the first time. In this country alone, the market has a volume of an estimated 47 billion euros – electric cars are playing an increasingly important role. Particularly noteworthy: Despite reduced funding and other negative special effects, the market share of electric cars in company car fleets rose slightly to 18.4 percent last year. The development is being promoted primarily by the more favorable taxation of electric cars than company cars.
SAP’s withdrawal is not the first setback for Tesla. It was only in December that Europe’s largest car rental company Sixt announced that it would no longer rent out electric cars from the US industry pioneer. Sixt also cited weak resale values after sharp price reductions as justification. Sixt cited the higher repair costs for electric cars as another reason. Since Sixt is committed to electrifying up to 90 percent of its fleet in Europe by the end of the decade, other electric car manufacturers are now likely to benefit.
In mid-January, Sixt’s competitor Hertz announced a partial withdrawal from the electric car business – Tesla is also affected here. Car expert Ferdinand Dudenhöffer from the Bochum Center Automotive Research is watching the development with concern: “A wave against electric cars is building up if landlords, leasing companies, dealers and ultimately used car buyers become unsettled,” he warned. According to the expert, the development is significantly favored by the traffic light government’s policy.
Dudenhöffer: “Tesla can still win the price war”
But Tesla itself is also to blame, as the expert admits. “The price war has consequences,” adds Dudenhöffer in an interview with ntv.de. The US car manufacturer is under gneedleless growth stress: It has grown too quickly and has excess capacity, while at the same time the electric car market is shrinking. “The next one or two years won’t be easy for Elon Musk,” predicts the car expert.
With a nine percent EBIT margin, Tesla still has the opportunity to further reduce prices. But Tesla boss Musk has to keep a close eye on the resale values of the cars if he doesn’t want to completely lose the large fleet providers and the important company car business. The key is to bridge the time until the next model. The Model Q (2) will only cost $25,000. According to recent reports, Tesla plans to begin production in mid-2025. “Musk can still win the price war, but Tesla now has to balance things well,” says Dudenhöffer.
For SAP employees who want to drive an electric car, the separation from Tesla will be manageable for now. The demand for a Tesla as a company car is still high, as SAP fleet manager Krautwasser says, but the car manufacturer’s technological lead is dwindling. There is already a welcome alternative to Tesla: the Polestar brand is very popular with SAP employees. Polestar is owned by the Chinese supplier Geely and its Swedish subsidiary Volvo. Tesla could be running out of time.