Following the controversary over the sale of tickets for popular live events such as Taylor Swift’s Eras tour and the Oasis Live ’25 Tour, the government launched a consultation exercise in January 2025 on the resale of tickets. Titled, ‘putting fans first’, the exercise sought the views of individuals and organisations on a range of policy proposals. One of these was the implementation of a cap on the resale price of tickets.
The government is not only considering whether to implement a cap but also the level at which it might be set. The following question was included in the consultation exercise.
What is the maximum uplift that you think should be applied if ticket resales were to be subject to a price cap? Please state the reason for your selection.
• no uplift at all
• 10% or less
• between 10 and 20%
• between 20 and 30%
• other – please state
Some platforms such as Twickets and Ticketswap already cap resale prices on their platforms at between 5 and 10 per cent above the face value of the ticket. They are, therefore, less likely to be affected by any new price regulation unless the ‘no uplift at all’ option is chosen. On other platforms, such as Viagogo and Stubhub, resellers are free to list tickets at whatever price they choose. This is often referred to as the uncapped market, and tickets for the Oasis tour with a face value of £150 were listed on these websites for £14 000. The implementation of a price cap is likely to have a big impact on this part of the resale market. The chief executive of StubHub stated in June 2025 that the business would probably have to exit the UK if a cap was introduced.
Although many fans dislike the uncapped secondary ticketing market, most economists take a more positive view. They see them as a way of facilitating mutually beneficial trade and helping to reallocate tickets to those with the highest willingness to pay. This reduces levels of allocative inefficiency/deadweight welfare loss in the market.
Economists also tend to argue against the use of price controls in competitive markets because of their negative impact on supply. If price controls reduce the available returns to sellers, they have an incentive to do something else with their time/resources i.e. switch to supplying other goods and services in markets not subject to price controls. This reduces supply in the regulated market and so could have a negative impact on consumer surplus.
What are the issues with the secondary market?
Given the benefits outlined by economists of having an uncapped secondary ticketing, why is the government considering the implementation of a price cap? One potential issue of having an uncapped secondary ticketing market is that developments in technology make it easier for professional resellers to buy very large quantities of tickets. This makes it increasingly difficult for fans who want to attend the event from being able to purchase a ticket.
Reports also suggest that professional resellers use illegal methods to both mass purchase and resell tickets. For example, to overcome any limits on sales imposed by the sellers in the primary market, some use automated software, fake IDs and multiple credit cards. Two people convicted of fraudulent trading in 2024 were found to have bought 47 000 tickets over a 212-year period, using 127 names and 187 different e-mail addresses.
Some resellers have also acted in ways that do not comply with consumer law when advertising tickets for sale. For example, not providing information such as the ticket number and other details about where the seat is located i.e. the block/area and row.
These rent seeking activities by professional resellers could outweigh the positive impact of uncapped secondary market on allocative efficiency.
Implementing a resale price cap would reduce the incentives for professional resellers to purchase large quantities of tickets and engage in these rent-seeking activities. However, in the consultation document the government recognises that the implementation of a resale price cap would be a ‘significant and complex intervention’.
An important implementation issue
To calculate the resale price cap for any live event, the original price of the ticket in the primary market needs to be known. This raises an interesting question – should the cap apply to the initial face value of the ticket or the total price the customer pays?
The face value of the ticket may only represent a proportion of the actual cost of buying a ticket because of the widespread use of drip pricing. This is the practice of applying additional fees as the consumer proceeds through the online purchasing process. These fees can sometimes add around 25 per cent and more to the price of a ticket. In the consultation document, the government suggested that the cap should apply to the face value of the ticket plus all compulsory fees.
One issue raised in the response to the consultation by the Competition and Markets Authority is that these fees are not always made clear by sellers in the primary market in a clear and transparent way. Therefore, for the policy to be effective, primary market sellers would have to make information on both ticket prices and any fees clearly and easily available. Recent changes to the law that prohibit drip pricing might help to address this issue.
The potential impact of a resale price cap on fraud
To avoid the price cap, there is a danger that increasing numbers of buyers and sellers stop using capped secondary ticket platforms, where activity is easier to observe/regulate, and switch to other non-specialist platforms where detection of illegal behaviour and enforcement of consumer law is more difficult. Examples of non-specialist platforms where sales might increasingly take place include Facebook Marketplace, Instagram Shop, X (formerly Twitter) and internet forums. With lower levels of consumer protection and the greater difficulty of detecting illegal behaviour, sales via these non-specialist platforms are more vulnerable to scams and fraud.
When referring to the impact of a resale price cap, the chief executive of StubHub argued that:
It will have a massive negative impact on consumers. It’s not like the demand is going to go away, it’s just going to move somewhere else, and that somewhere else is going to be the black market [where] consumers aren’t protected.
To test the hypothesis that price controls lead to greater incidences of fraud, one study used polling data to compare ticket fraud rates in the UK with Victoria, Australia and Ireland. In 2009, the state government of Victoria made it illegal for tickets to be resold for more than 10 per cent of their face, while the Irish government introduced the Sale of Ticket Act in 2021 that prohibited the resale of tickets above their original price. The study found that the proportion of respondents who reported being victims of ticket fraud over the previous two years was around four times higher in Victoria and Ireland than the UK. The most common sales channel where consumers experienced ticket fraud in all three countries were social media platforms.
Another example of the potential impact of the price cap in Ireland on fraud relates to the first ever regular-season NFL game that is being played in Dublin on 28 September 2025 between the Pittsburgh Steelers and the Minnesota Vikings. The online bank, Revolut, reported an 80 per cent increase in the number of ticket scams when tickets for this game went on sale.
In response to the consultation exercise, the Competition and Markets Authority backed the implementation of a resale price. It will be interesting to see if the government goes through with the measure in the next few months.
Consultation
Articles
Blogs on this site
Questions
- Why might event organisers set ticket prices below the market clearing rate? Illustrate the impact of setting prices below market clearing rates on consumer, producer and total surplus in the primary market for tickets.
- Using a demand and supply diagram, explain how the uncapped secondary ticket market could reduce deadweight welfare loss. Discuss any assumptions you have made about the allocation of tickets among potential buyers in the primary market (i.e. sorting).
- Is it possible for professional resellers to continue making a profit if tickets are sold at market clearing rates in the primary market? Explain your answer.
- Under what circumstances would a maximum price set below the market clearing rate in a competitive market have a negative impact on consumer surplus? Draw a diagram to illustrate your answer.
- Using examples, explain what is meant by ‘rent seeking’ in economic theory.
Outline some of the recent updates to the law on pricing information that businesses must show customers.
- What policies, other than a resale price cap, could the government introduce to try to address some of the issues with the ticketing market for live events?
The UK energy regulator, Ofgem, has announced that the UK energy price cap will rise in October by an average of 2%. The energy price cap sets the maximum prices for electricity and gas that can be charged by suppliers to households. For those paying by direct debit, the maximum electricity price per kilowatt-hour (kWh) will rise from 25.73p to 26.35p, with the maximum daily standing charge rising from 51.37p to 53.68p. As far as gas is concerned, the maximum price per kWh will fall slightly from 6.33p to 6.29p, with the maximum daily standing charge rising from 29.82p to 34.03p. Ofgem estimates that this will mean that the capped cost to the average household will rise from £1720 to £1755.
The average capped cost is now much lower than the peak of £4279 from January to March 2023. This followed the huge increase in international gas prices in the aftermath of the invasion of Ukraine and the cutting off of gas supplies from Russia. Note that although the suppliers received these capped prices, average consumers’ bills were limited to £2500 from October 2022 to March 2024 under the government’s Energy Price Guarantee scheme, with suppliers receiving a subsidy from the government to make up the shortfall. But despite today’s cap being much lower than at the peak, it is still much higher than the cap of £1277 prior to Russia’s invasion of Ukraine: see Chart 1 (click here for a PowerPoint).
So is the capped price purely a reflection of the international price of gas, or is it more complicated? The picture is slightly different for gas and electricity.
Gas prices
As far as gas prices are concerned, the price does largely reflect the international price: see Chart 2 (click here for a PowerPoint).
The UK is no longer self-sufficient in gas and relies in part on imported gas, with the price determined in volatile international markets. It also has low gas storage capacity compared with most other European countries. This leaves it highly reliant on volatile global markets in periods of prolonged high demand, like a cold winter. Is such cases, the UK often has to purchase more expensive liquefied natural gas (LNG) from global suppliers.
Additionally, taxes, environmental levies and the costs of the nationwide gas distribution network contribute to the overall price for consumers. Changes in these costs affect gas prices. These are itemised below in the case of electricity.
With electricity pricing, the picture is more complex.
Electricity prices
Electricity generation costs vary considerably with the different methods. Renewable sources like wind and solar have the lowest marginal costs, while natural gas plants have the highest, although gas prices fluctuate considerably.
So how are consumer electricity prices determined? And how is the electricity price cap determined? The price cap for electricity per kWh and the daily standing charge for electricity are shown in Chart 3 (click here for a PowerPoint).
Marginal cost pricing. The wholesale price of electricity in the UK market is set by the most expensive power source needed to meet demand on a day-by-day basis. This is typically gas. This means that even when cheaper renewables (wind, solar, hydro) or nuclear power generate most of the electricity, high gas prices can increase the cost for all electricity. The wholesale price accounts for around 41% of the retail price paid by households.
It also means that profits for low-marginal-cost producers could increase significantly when gas prices rise. To prevent such (low-carbon) suppliers making excess profits when the wholesale price is high and possibly making a loss when it is low, the actual prices that they receive is negotiated in advance and a contract is signed. These contracts are known as Contracts for Difference (CfDs). CfDs provide a fixed ‘strike price’ to low-carbon generators. The strike price is set so as to allow low-carbon generators to recoup capital costs and is thus set above the typical level of marginal cost. If the wholesale price is below the strike price, payments to generators to cover the difference are funded by amounts collected from electricity suppliers in advance using the CfD Supplier Obligation Levy. If the wholesale price is above the strike price, the difference is returned to consumers in terms of lower electricity bills.
Policy costs. Electricity bills include an element to fund various social and environmental objectives. This element is also included in the cap. From October to December 2025, this element of the cap will be 11.3%. The money helps to subsidise low-carbon energy generation and fund energy efficiency schemes. It also funds the Warm Home Discount (WHD). In the October to December 2025 price cap, this amounted to a discount for eligible low-income and vulnerable households of £150 per annum on their electricity bills. The WHD element is included in the standing charge in the price cap. From October 2025, more generous terms will mean that the number of households receiving WHD will increase from 3.4 million to 6.1 million households. This is the main reason for the £35 increase in the cap.
Network costs. These include the cost of building, maintaining and repairing the pipes and wires that deliver gas and electricity to homes. From October to December 2025, this element of the cap will be 22.6%.
Supplier business costs. These include operating costs (billing, metering, office costs, etc.) and servicing debt. From October to December 2025, this element of the cap will be 15.4%.
Profit Allowance. A small percentage is added to the price cap for energy suppliers’ profits. This is known as the Earnings Before Interest and Tax (EBIT) allowance and is around 2.4%. This has a fixed component that does not change when the overall price cap is updated and a variable component that rises or falls with changes in the cap.
Reliance on gas, low gas storage facilities, marginal cost pricing and the commitment to invest in low-carbon electricity and home heating all add to the costs of energy in the UK, making UK electricity prices among the highest in the world.
Articles
Information and Data
Questions
- Why are the UK’s energy prices among the highest in the world?
- What are the arguments for and against subsidising wind power?
- What is the Contracts for Difference scheme in low-carbon energy. What CfDs have been awarded? Assess the desirability of the scheme.
- Is the capping of gas and electricity prices the best way of providing support for low-income and vulnerable consumers?
- How are externalities relevant in determining the optimal pricing of electricity?
In a blog in October 2024, we looked at global uncertainty and how it can be captured in a World Uncertainty Index. The blog stated that ‘We continue to live through incredibly turbulent times. In the past decade or so we have experienced a global financial crisis, a global health emergency, seen the UK’s departure from the European Union, and witnessed increasing levels of geopolitical tension and conflict’.
Since then, Donald Trump has been elected for a second term and has introduced sweeping tariffs. What is more, the tariffs announced on so-called ‘Liberation Day‘ have not remained fixed, but have fluctuated with negotiations and threatened retaliation. The resulting uncertainty makes it very hard for businesses to plan and many have been unwilling to commit to investment decisions. The uncertainty has been compounded by geopolitical events, such as the continuing war in Ukraine, the war in Gaza and the June 13 Israeli attack on Iran.
The World Uncertainty Index (WUI) tracks uncertainty around the world by applying a form of text mining known as ‘term frequency’ to the country reports produced by the Economist Intelligence Unit (EIU). The words searched for are ‘uncertain’, ‘uncertainty’ and ‘uncertainties’ and the number of times they occur as percentage of the total words is recorded. To produce the WUI this figure is then multiplied by 1m. A higher WUI number indicates a greater level of uncertainty.
The monthly global average WUI is shown in Chart 1 (click here for a PowerPoint). It is based on 71 countries. Since 2008 the WUI has averaged a little over 23 000: i.e. 2.3 per cent of the text in EIU reports contains the word ‘uncertainty’ or a close variant. In May 2025, it was almost 79 000 – the highest since the index was first complied in 2008. The previous highest was in March 2020, at the start of the COVID-19 outbreak, when the index rose to just over 56 000.
The second chart shows the World Trade Uncertainty Index (WTUI), published on the same site as the WUI (click here for a PowerPoint). The method adopted in its construction therefore mirrors that for the WUI but counts the number of times in EIU country reports ‘uncertainty’ is mentioned within proximity to a word related to trade, such as ‘protectionism’, ‘NAFTA’, ‘tariff’, ‘trade’, ‘UNCTAD’ or ‘WTO.’
The chart shows that in May 2025, the WTUI had risen to just over 23 000 – the second highest since December 2019, when President Trump imposed a new round of tariffs on Chinese imports and announced that he would restore steel tariffs on Brazil and Argentina. Since 2008, the WTUI has averaged just 2228.
It remains to be seen whether more stability in trade relations and geopolitics will allow WUI and WUTI to decline once more, or whether greater instability will simply lead to greater uncertainty, with damaging consequences for investment and also for consumption and employment.
Articles
- IMF World Economic Outlook: economic uncertainty is now higher than it ever was during COVID
The Conversation, Sergi Basco (23/4/25)
- Economic uncertainty hits new high
McKinsey, Sven Smit et al. (29/5/25)
- Trade tensions and rising uncertainty drag global economy towards recession
UNCTAD News (25/4/25)
- IMF Warns Global Economic Uncertainty Surpasses Pandemic Levels
The Global Treasurer (24/4/25)
- Britons ‘hoarding cash amid economic uncertainty and fear of outages’
The Guardian, Phillip Inman (10/6/25)
- America’s Brexit Phase
Foreign Affairs, Jonathan Haskel and Matthew J. Slaughter (10/6/25)
- Goldman Sachs’ CEO on the ‘Big, Beautiful Bill,’ Trump’s Tariffs and Economic Volatility
Politico, Sam Sutton (13/6/25)
- The Countries Where Economic Uncertainty Is Rising Fastest
24/7 Wall St., Evan Comen (9/6/25)
- Trump’s tariffs have finally kicked in, so what happens next?
The Conversation, Maha Rafi Atal (8/8/25)
Uncertainty Indices
Questions
- Explain what is meant by ‘text mining’. What are its strengths and weaknesses in assessing business, consumer and trade uncertainty?
- Explain how the UK Monthly EPU Index is derived.
- Why has uncertainty increased so dramatically since the start of 2025?
- Compare indices based on text mining with confidence indices.
- Plot consumer and business/industry confidence indicators for the past 24 months, using EC data. Do they correspond with the WUI?
- How may uncertainty affect consumers’ decisions?
The debate about a minimum price for alcohol continues to be prompted by concerns over high levels of drinking, its effect on public health and public order, and a widespread belief that most of the alcohol that contributes to drunken behaviour is irresponsibly priced and sold. Minimum pricing for alcohol, although considered a radical intervention, is not a new policy. A minimum unit price (MUP) for alcohol was introduced in Scotland in 2018, in Wales in 2020, in the Republic of Ireland in 2022 and looks likely to be introduced in Northern Ireland.
Despite more countries following Scotland’s lead, there are no current plans to consider an application of an MUP in England. However, with recent increases in the MUP in Scotland and the findings of a five-year review in Wales, it would suggest that this policy will continue to be at the forefront of discussions of how to tackle impacts of alcohol consumption.
Reasons and options for intervention
The main goal of introducing a minimum unit price for alcohol is to tackle unwanted consequences from the consumption of alcohol. While many people consume alcoholic drinks safely without any problems, some patterns of alcohol use are associated with significant physical, mental and social harm.
It costs UK society more than £27 billion a year through a combination of health, crime, workplace and social welfare costs. Therefore, some governments in the British Isles have deemed it necessary to intervene in this market to reduce alcohol-related harm and protect the health of those regularly drinking more than the recommended 14 units per week.
Research has shown that making alcohol less affordable can reduce consumption and hence related harms. The World Health Organization considers minimum pricing one of its ‘best buys’ for tackling harmful alcohol use.
There are three main policy options that aim to reduce the consumption of alcohol by making alcohol less affordable. One is to tax alcoholic drinks; the second is to set a minimum price per unit of alcohol; the third is to ban the sale of alcohol drinks below cost price (the level of alcohol duty plus VAT).
The policy option of an MUP has been adopted by Scotland, Wales and the Republic of Ireland; England has opted to use a ban on selling alcohol below the level of alcohol duty plus VAT (since 28 May 2014).
What is a minimum price?
The introduction by the government of a minimum price for a product means that it cannot legally be sold below that price. It can be set in order to achieve certain economic or social objectives that are not currently being achieved at equilibrium in the market. In order for the policy to have an effect, the minimum price must be set above the equilibrium price. This price floor then prevents prices from falling too low and settling back at equilibrium below the MUP.
A common misconception is that introducing a minimum price for alcohol is a form of taxation. However, this is not the case. Implementing an MUP means that any extra money from higher prices goes to the retailers and producers, not to the government.
Why choose a minimum price floor?
The policy has two main objectives. The first is to protect the interests of drinkers who may make poor decisions on their own behalf. This may be from lack of information, social pressures or a disregard for their own long-term health or welfare.
The second objective is to reduce the external costs placed on health services, the police, the criminal justice system, on fellow citizens or employers. There are also longer-term external costs when alcohol abuse impacts on productivity or leads to repeated absences from work.
It is argued that MUP intervention can encourage positive changes in behaviour of both consumers and producers. It can target harmful excessive drinking, while leaving the more moderate drinker relatively unaffected.
A positive impact on consumers is the possible changes in demand. People who previously consumed cheap, and often strong, drinks, such as cheap cider, will find that their marginal private cost of consuming alcohol has increased. Depending on the price elasticity of demand, their consumption will decrease and there will be a reduction in alcohol-related violence and other external costs. A positive impact on producers is that it can encourage drinks manufacturers themselves to reduce the alcohol content of their products and, therefore, limit any increase in price passed on to the consumer.
How it differs in the different parts of the British Isles
While minimum alcohol pricing is in place in several countries, policies differ. In terms of the British Isles, in 2018 Scotland became the first country to introduce a national minimum price for all types of alcohol. Two years later, Wales followed suit. The Republic of Ireland introduced minimum pricing in January 2022, while Northern Ireland has been engaged in consultation on the policy for several years. The following table shows when MUP was introduced and at what rates.
Has the MUP been effective?
Wales has reached the five-year review point since the MUP was introduced. Many of the findings within the Welsh evaluation have strong resonance with those elsewhere, particularly those of the final Scottish evaluation. There have been five main findings:
- Implementation has been smooth. Retailers have largely complied with the law, and enforcement has been effective.
- Certain cheap alcohol products have disappeared. Large bottles of strong cider, for example, are now rare. There have also been shifts in promotions and product availability.
- There are indications that overall alcohol consumption in Wales has declined. While it is difficult to measure directly, purchasing data suggests a reduction.
- Concerns about unintended consequences have not materialised significantly. Predictions of a rise in home brewing, substance switching, shoplifting and cross-border purchasing have not been widely observed.
- Some drinkers have changed their purchasing habits. A minority have switched from cider to wine or spirits as price differences narrowed. Others, particularly those on low incomes, experienced further struggles in financially maintaining their drinking habits.
There was also a study published last year (2024) in the journal Economic Inquiry, looking at the impacts of the policy during lockdown restrictions. The study showed that the introduction of MUP in Wales resulted in a 15% increase in transaction prices and a sharp reduction in the amount of alcohol bought, around 20%, with an overall drop in expenditure per customer compared to England over the same period.
However, it should be noted that the COVID pandemic disrupted drinking habits and the availability of alcohol. In addition, evaluating the overall effects of the policy has been complex with other economic factors, including the cost-of-living crisis, also influencing affordability.
Is it a fair policy?
A counter argument to applying a price intervention on alcohol is that it may have unintended private and external costs. One argument claims that young people could decide to switch to cheaper non-alcoholic drugs instead. Alternatively, they may seek to purchase alcohol on illegal shadow markets.
Critics of the policy argue that it negatively impacts those who consume alcohol responsibly, especially families on average or below-average incomes. The wine and spirits industry tried to lobby against the Scottish government, arguing that it is inconsistent with the operation of the free market and that the intervention creates a barrier to trade. They claim that lower sales of alcoholic drinks will cost jobs in the UK, both in manufacturing and from reduced revenues of corner shops, pubs and other retailers.
There is also an argument that relying solely on an MUP targets the affordability of drinking rather than addressing all aspects of alcohol harm. Therefore, this policy is not necessarily effective in achieving all the government’s goals. Critics argue that this policy should be one component of a more comprehensive strategy delivery, which might include education, restricting the availability of alcohol, banning advertising, increasing alcohol duty, etc.
Conclusion
Although there are currently no plans to implement an MUP in England, there is ongoing pressure for the Government to consider adopting one. In the Autumn of 2024, Lord Darzi carried out an independent investigation of the NHS in England. This investigation into the NHS highlighted the ‘alarming’ death toll in England caused by cheap drink (see link below). This led public health leaders to call for action to increase the price of cheap alcohol in supermarkets and off-licences.
However, the policy itself is not without its critics, especially those citing continued trends in actual numbers of alcohol-related deaths. Therefore, it is suggested that the policy needs to be accompanied by well-funded treatment and support services for people experiencing alcohol-related difficulties. If combined with other policy measures and social support, it has the potential to contribute significantly to reductions in alcohol-related harm.
Despite reservations, overall a minimum price per unit of alcohol is viewed by many as a justified intervention and is well supported by evidence. It has been accepted that a minimum price is required to reduce consumption closer towards the social optimum and in order to bring about change in consumer and producer behaviour. Given the evidence provided from current MUP countries and ongoing discussions of alcohol-related deaths in England, health officials believe a review is almost certain, even though the current government reportedly ruled out minimum unit pricing shortly after winning power.
Articles
Reports
Questions
- Using a supply and demand diagram, discuss the effect of introducing a minimum price per unit of alcohol.
- How is the price elasticity of demand for alcoholic drinks relevant to determining the success of minimum pricing?
- Compare the effects on alcohol consumption of imposing a minimum unit price of alcohol with a ban the sale of alcohol below cost price. What are the revenue implications of the two policies for the government?
- What negative externalities occur as a result in the over consumption of alcohol? How could a socially efficient price for alcohol be determined?
- Could alcohol consumption be described as a ‘de-merit good’? Explain.
- Rather than targeting the price of alcohol, what other policies could the government introduce to tackle over consumption of alcohol?
- What will determine the number of people travelling across borders within the UK (i.e. from Scotland or Wales to England) to buy cheaper alcoholic drinks?
Tesla sales have fallen dramatically recently. In Europe they were down 47.7% in January 2025 compared with January 2024. In Spain the figure was 75.4%, in France 63.4%, in Germany 59.5%, in Sweden 44.3%, in Norway 37.9%, in the UK 18.2% and in Italy 13.4%. And it was not just Europe. In Australia the figure was 33.2%, in China 15.5% and in California 11.6%. Meanwhile, Tesla’s share price has fallen from a peak of $480 on 17 December 2024 to $338 on 21 February 2025, although that compares with $192 in February 2024.
So why have Tesla sales fallen? It’s not because of a rise in price (a movement up the demand curve); indeed, Tesla cut its prices in 2024. Part of the reason is on the supply side. In several countries, stocks of Teslas are low. Some consumers who would have bought have had to wait. However, the main reason is that the demand curve has shifted to the left. So why has this happened?
A reaction to Elon Musk?
One explanation is a growing unpopularity of Elon Musk among many potential purchasers of electric vehicles (EVs). People are more likely to buy an EV if they are environmentally concerned and thus more likely to be Green voters or on the political left and centre. Elon Musk, by supporting Donald Trump and now a major player in the Trump administration, is seen as having a very different perspective. Trump’s mantra of ‘drill, baby drill’ and his announced withdrawal from the Paris agreement and the interventions of Trump, Vance and Musk in European politics have alienated many potential purchasers of new Teslas. Elon Musk has been a vocal supporter of the right-wing Alternative for Germany (AfD) party, describing the party as the ‘last spark of hope for this country’ (see BBC article linked below).
There has been outspoken criticism of Musk in the media and the Financial Times reports existing owners of Teslas, who are keen to distance themselves from Musk, ordering stickers for their cars which read ‘I bought this before Elon went crazy’. In a survey by Electrifying.com, 59% of UK potential EV buyers stated that Musk’s reputation put them off buying a Tesla.
Other reasons for a leftward shift in the demand for Teslas
But is it just the ‘Musk factor’ that has caused a fall in demand? It is useful to look at the general determinants of demand and see how each might have affected the demand for Teslas.
The price, number, quality and availability of substitutes Tesla faces competition, not only from long-established car companies, such as Ford, VW, Volvo/Polestar, Seat/Cupra and Toyota, moving into the EV market, but also from Chinese companies, such as BYD and NIO. These are competing in all segments of the EV market and competition is constantly increasing. Some of these companies are competing strongly with Tesla in terms of price; others in terms of quality, style and imaginative features. The sheer number of competitor models has grown rapidly. For some consumers, Teslas now seem dated compared with competitors.
The price and availability of complements. The most relevant complement here is electrical charging points. As Teslas can be charged using both Tesla and non-Tesla charging points, there is no problem of compatibility. The main issue is the general one for all EVs and that is how to achieve range conveniently. The fewer the charging points and more widely disbursed they are, the more people will be put off buying an EV, especially if they are not able to have a charging point at home. Clearly, the greater the range of a model (i.e. the distance that can be travelled on a full battery), the less the problem. Teslas have a relatively high range compared with most (but not all) other makes and so this is unlikely to account for the recent fall in demand, especially relative to other makes.
Expectations. The current best-selling Tesla EV is the Model Y. This model is being relaunched in a very different version, as are other Tesla models. Consumers may prefer to wait until the new models become available. In the meantime, demand would be expected to fall.
Conclusions
As we have seen, there have been a number of factors adversely affecting Tesla sales. Growing competition is a major factor. Nevertheless, the increasing gap politically between Elon Musk and many EV consumers is a major factor – a factor that is likely to grow in significance if Musk’s role in the Trump administration continues to be one of hostility towards the liberal establishment and in favour of the hard right.
Articles
- Tesla’s sales plummet across Europe
Financial Times, Patricia Nilsson, Laura Pitel and Kana Inagaki (6/2/25)
- Tesla sales plummet nearly 50% in Europe – what’s behind the drop?
motor1.com, Brian Potter (5/2/25)
- Elon Musk is putting buyers off Tesla, survey reveals
Electrifying.com, Tom Barnard (27/1/25)
- ‘I felt nothing but disgust’: Tesla owners vent their anger at Elon Musk
The Guardian, Ashifa Kassam (25/2/25)
- Elon Musk is putting consumers off buying Tesla cars with his behaviour, research suggests
indy100, Ellie Abraham (27/1/25)
- Are Elon Musk’s politics costing Tesla sales?
CNN, Chris Isidore (18/2/25)
- Is Tesla’s sales slump down to Elon Musk?
The Conversation, James Obiegbu and Gretchen Larsen (11/2/25)
- Tesla Sales Are Tanking Across The World
InsideEVs, Patrick George (8/2/25)
- Is Elon Musk steering Tesla into a brand crisis?
The Drum, Audrey Kemp (29/1/25)
- Why are Tesla sales down? Elon Musk’s politics may be to blame
The Standard, Saqib Shah (18/2/25)
- Tesla sales slump on ageing line up, competition
Argus, Chris Welch (12/2/25)
- Trends in electric vehicle charging, Global EV Outlook 2024
International Energy Agency (23/4/24)
- What Are Tesla’s (TSLA) Main Competitors?
Investopedia, Peter Gratton (1/2/25)
- Europe leaders criticise Musk attacks
BBC News, Paul Kirby & Laura Gozzi (7/1/25)
- German far-right leader Weidel woke up to missed call from Elon Musk
Yahoo News, dpa international (24/2/25)
- ‘Major brand worries’: Just how toxic is Elon Musk for Tesla?
The Guardian, Dan Milmo and Jasper Jolly (8/3/25)
Questions
- Why have BYD EV sales risen so rapidly?
- If people feel strongly about a product on political or ethical grounds, how is that likely to affect their price elasticity of demand for the product?
- Find out how Tesla shareholders are reacting to Elon Musk’s behaviour.
- Find out how Tesla sales have changed among (a) Democratic voters and (b) Republican voters in the USA. How would you explain these trends?
- Identify some products that you would or would not buy on ethical grounds. How carefully have you researched these products?
Scams and Scandals: the Great Ticket Rip-Off