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An article submitted to CNN describes the situation of competition between Tesla and Volkswagen. It is noted that Volkswagen significantly increased sales of electric vehicles and plug-in hybrids in 2020. Therefore, thanks to Volkswagen, an increase in supply in the electric vehicle market was recorded. Specifically, Volkswagen sold 231,600 battery electric vehicles in 2020. The authors of the article note that while this is still less than half of Teslas sales, this is 214% more than the previous year and shows that Germanys huge auto industry is starting to challenge the electric vehicle leader.
In 2020, Volkswagen also sold 190,500 plug-in hybrids, another substitute for Teslas electric vehicles. In 2020, BMW sold 44,530 electric cars, 13% more than in 2019, and 148,000 plug-in hybrids. The authors of the article also note that the total number of vehicles sold by Volkswagen in 2020 was 9.3 million, which is 15% less than in 2019. Still, in December, sales were only 3.2% lower, which indicates a recovery in demand, despite the pandemic.
Given the data presented above, the most likely danger could be a shift in demand due to customer expectations (Madariaga, 2005). As Volkswagen became the first real competitor to Tesla in the electric vehicle market, Tesla has ceased to be a monopoly, and buyers are likely to expect a price decline as new players enter the market. Because of these expectations, buyers could delay their purchase of an electric vehicle, which will be the primary driver of the demand shift.
Most likely, due to expectations of a price decrease, demand will decrease, leading to an increase in the new equilibrium price. However, the shift in demand may be insignificant. So far, Tesla has only two serious competitors Volkswagen and BMW, and this cannot be called a sufficient condition for a substantial price reduction. Besides, a shift in the demand curve to the left due to expectations may be offset by a change in the demand curve to the right due to increased interest in buying electric vehicles after new players entered the market.
References
Madariaga, B. (2005). Economics for Life: 101 Lessons You Can Use Every Day! Houghton Mifflin College Division.
Riley, C. (2021). Volkswagen and Audi are starting to challenge Tesla. CNN Business. Web.
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