UBS analysts have predicted an aggressive price war to spread between manufacturers mid-way through this year, as a “glut” of cars appears on the market.
Slowing economic growth and inflationary pressures will likely hit prospective buyers come the second half of the year, analysts said, causing to lapse in demand and leaving vehicles unsold.
Global car production could exceed sales by 6% as a result, UBS expects, leading to a surplus of 5mln cars which manufacturers will have to shift by lowering prices.
“Given the bullish production schedules, we see high risk of overproduction and growing pricing pressure,” UBS said.
“The price war has already started unfolding in the EV space, and we expect it to spread into the combustion engine segment.”
Tesla is among those having already slashed prices, with its basic Model Y now £7,000 cheaper than at start of the year, costing just shy of £45,000 in the UK.
The model became the UK’s bestselling car in March as a result, according to the Society of Motor Manufacturers and Traders, and also helped Elon Musk’s firm to achieve record deliveries in the first three months of the year.
Ford Motor Company (NYSE:F) and Lucid are among manufacturers to have already reacted to Tesla's cuts by lowering their own prices earlier this year.