Tesla's Price Cuts Are "Dangerous" For Residual Values: Kia UK Boss

Tesla’s radical move to cut prices massively in the US, China and Europe may be imitated by other EV startups like XPeng and Aito, but some of the legacy carmakers don’t seem to keen on the idea.

Kia, for instance, does not see that as a good thing because it could have “dangerous” implications for residual values in the longer term. At least that’s the opinion voiced by Kia UK president and CEO Paul Philpott to Autocar.

In what is very likely a strategy directed from the higher echelons of parent company Hyundai Motor Group, Kia UK’s boss said the company won’t rush to match Tesla’s heavy discounts of up to £8,000. Philpott warned that such a “blunt” action could inflict significant damage on the residual values of Kia electric vehicles.

“It’s a pretty dangerous strategy to reduce prices, and we have a lot of other tools at our disposal that we would employ before we did that,” the executive said. He explained that controlling supply, offering finance support or looking at tactical offerings would be ways to protect existing customers.

“Most new cars are bought on a PCP or lease, and there are two key components that set what you pay: the upfront price and the residual value. If your residual values are on the slide – as Tesla’s have been – and you then cut your pricing between £5000 [and] £8000, then it’s likely to have an impact. The market will decide, but that’s what we would expect.”

Philpott added that undermining residual values means there will be no saving for lease customers. He also said it will be interesting to see how the fleet buyers respond to this “complicated situation.”

Another factor that needs to be taken seriously into account is customer dissatisfaction. “And then you have to contend with the uproar of the people who bought at the higher price before you made the reduction, which in Tesla’s case is almost 16,000 in the UK,” Philpott said.

Kia UK has an eight-month waiting list for the Kia Niro EV and 12-month waiting list for the Kia EV6. The carmaker had a record-breaking year in the UK in 2022, topping 100,000 registrations for the first time. The Korean automaker will add the seven-seat Kia EV9 to its electric lineup later this year as a rival for the Tesla Model X.

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