For some time, the average EV price continued to rise along with commodities costs, a trend that threatened to slow down the ongoing transition to all-electric vehicles, which has happened a bit quicker than previously expected. However, in the past few months, this EV price trend has turned the other way around, with both the Tesla Model Y and Ford Mustang Mach-E receiving big cuts as the pricing war heats up. Even though Ford CEO Jim Farley has long anticipated this happening, the exec recently criticized Tesla’s strategy, and now, he’s calling EV prices cuts a “worrying trend,” according to Reuters.
“You do not want to commoditize the product,” Farley said while speaking at a recent Wall Street Journal forum. “The resale value for people who bought at higher prices is awful. They never forget.” Regardless, Ford will follow Tesla’s lead in terms of future price cuts, but Farley noted “there’s a limit to how far we’ll go.”
Rapid price cuts are certainly a concern for those who purchased a vehicle like the Model Y or Mach-E prior to these most recent reductions, as those vehicles essentially lost value overnight – a compete reversal of the upward trend we’ve enjoyed with most vehicles for years now. However, it’s also a welcome change for those that have wanted to purchase an EV, yet were unable to because of high costs.
It’s truly a catch-22 for automakers like Ford, who are working to drive down the cost of EVs while also making those vehicles profitable. In the case of the Mach-E, lower commodities prices, along with the recent switch to a cheaper lithium-iron phosphate battery in standard range models, played a large role in that crossover’s most recent round of discounts, however.
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Comments
Well, it’s the old supply and demand model. When supply gets out ahead of demand that can be one reaction.
You can’t have it both ways! That is Farley’s lesson, or should be! Ford chose to sell the Maverick at a low price to obviously gain market share. That worked (albeit along the way angering customers with horrific communications). Tesla was OVERCHARGING because it was the only game in town. Then Musk decided to anger its core customer base because of politics and his sales plummeted. He HAD to lower prices. That coincided with more competitive pricing from folks like Ford…So I guess I don’t really get Farley’s point!
Hey, not to worry… just jack up the prices on the ICE-powered vehicles again to make up for the losses… I’m sure those buyers won’t mind subsidizing those EV buyers that need to virtue signal, with the EVs made available at reduced prices.
After a 2 year wait I am walking away from my F150 Lightning order because Ford increased the price twice, putting it above the tax credit MSRP limit, the dealer added $5k markup, resulting in a $103,000 vehicle after sales tax.
It’ll be sad seeing it sit on the lot with the 2 other Lariats for 2-3 months but better that then eating $30,000 depreciation in the first year or two.
The bloom is off the Lightning. Too bad.
Try as they might, the administration cannot compel us to buy EVs. There is no groundswell to supply these, and when the government imposed deadline on producing ICE vehicles rolls around, most folks will great it not with enthusiasm but with grudging compliance.
That’s “greet”, not great.
The automakers all charged full head of steam into the EV market, chasing high margins (that didn’t help Tesla become profitablenwotjout carbon credits and crypto schemes for a VERY long time). That increased competition was always going to drive prices down.
We are rapidly approaching, or have arrived at, EV saturation, where anyone who wants to buy an EV can buy one from a supply perspective. As that happens and more competitors rush in, prices and margins will nose dive. That’s going to be bad news if you expected to maintain transaction prices to support your investments.
It is a specious claim that the Mach-e’s value for previous owners dropped. The same goes for the argument that as soon as you drive a new vehicle off the lot it depreciates by thousands of dollars. Only a handful of new vehicle customers of any brand or powertrain sell or trade in the first year of ownership. But recently, the opposite is true. Hard to get or hard to find used models will command prices near or higher than new model MSRP’s