How to Successfully Manage the Transition into the Battery Electric Vehicle Market. A Comparison of Pricing Strategies in Developed and Emerging Markets

Bachelor Thesis from the year 2023 in the subject Business economics - Business Management, Corporate Governance, grade: 1,0, University of the Americas Puebla, language: English, abstract: In the present years, many established automakers find themselves in the transition from internal combustion engine vehicles to electric vehicles. Climate change is a growing concern in society, so car manufacturers try to do their part to combat it. As of today, the most promising environmentally friendly option is the battery electric vehicle, so many expect it to dominate the markets in a few years. However, this transition brings many fundamental questions, one of them being the pricing strategy. Elevated production costs, government intervention, and very dynamic competition make the companies face a situation they have not faced before, so, this investigation tries to guide them by comparing the three most used strategies: penetration pricing, price skimming, and a cost-plus strategy. I used a survey in combination with information from the literature to assess the effectiveness of each of the pricing strategies. The results have been analyzed for both emerging and developing markets using the examples of Germany and Mexico, but only small systematical differences could be identified. As the results show, neither penetration nor a skimming strategy is promising. In the case of the penetration strategy, companies would have to sell cars significantly below production costs, and once they increase the prices to recover financial losses, clients would flee to other brands due to a high demand elasticity and low brand loyalty. For the price skimming strategy, it was found that it is very hard to generate a solid initial sales volume. Thus, companies sticking with the simple cost-plus strategy are most likely to succeed.