EV competition finally yields: Ford cuts Mustang Mach-E prices after Tesla, Kia, Hyundai, Chevrolet, Nissan

EVs now start at $27,000, about $20,000 less than the average new-vehicle transaction price. It’s a good thing all around. except for stock prices.

By wolf richter For wolf street,

Ford announced today that it has cut the MSRP of its 2023-model-year Mustang Mach-E by $600 to $5,900, depending on the model, and slashed its extended-battery option by $1,600. This brings the low end of the Mach-E down to $45,995, which is justifiable Below the average transaction price for all new vehicles of $46,400,

Ford isn’t cutting prices, and thus its profit margins, not out of the goodness of its heart, but because it’s forced to by competition — and it’s lagging. Ford admitted as much: It said the price cuts are designed to keep the Mach-E “competitive in the marketplace.” It said, “We are not going to give the land to anyone.” The Mach-E was the third best-selling EV in the US in 2022 behind Tesla’s Model Y and Tesla’s Model 3.

Tesla went on a big round of price cuts in the US in January, including on the Model Y, a crossover SUV that competes directly with the Mach-E. Chevrolet cut the prices of its mass-produced EVs, the Bolt and the Bolt EUV. Kia and Hyundai have also cut prices of their electric crossover models. Nissan has cut the prices of its EVs.

There are electric crossover SUVs on the market in the US that cost less than Ford or Tesla’s low prices, including models from Kia, Hyundai and Volkswagen. After the price cut, base model MSRPs for the Nissan Leaf and Chevrolet Bolt are in the $27,000 range; They’re about $20,000 less than the average transaction price for new vehicles.

That’s why it’s getting hot. These reductions in prices are a natural evolution of a relatively new industry (EV) with very low barriers to entry and lots of new entrants that have attracted huge amounts of investor money.

Ford said that customers who are still waiting for the Mustang Mach-E will “automatically” get the lower price. And Ford will “reach directly to customers” who bought after January 1 and have already taken delivery. Customers who took delivery before January 1st are out of luck.

Ford in his Press release said it is now ramping up production of the Mach-E as its EV supply chain is “coming online,” to “help reduce customer wait times and take advantage of streamlined costs.”

The supply chain in the automotive industry is extremely complex, and mass production takes a long time to manufacture. EVs require different supply chains, including electric drive components and critically, batteries and materials. Tesla is years ahead in building its supply chains.

Ford has become infamous for raising the price of its electric F-150 Lightning three times in a row, most recently in december, by a combined $16,000. But for now, it faces little competition in pickups. Tesla still doesn’t have a pickup truck for sale, despite promising one from 2019, and the only other competitor with a pickup is Rivian, a startup automaker.

Tesla had the auto industry’s highest profit margin—the difference between the selling price and the cost of manufacturing the vehicle. The high-margin manufacturer can cut prices more than low-margin competitors, and still make money, and thus can be aggressive in protecting its market share, which is under pressure from other EV manufacturers. I have come.

Ford said, “The updated pricing is part of Ford’s plan to keep SUVs competitive in a rapidly changing market, while cementing Ford’s position as the No. 2 US EV maker as it looks to grow that part of the business.” continues.”

China is the world’s most vibrant, largest and competitive EV market with hundreds of EV manufacturers. Tesla’s China-made vehicles are among the flagship models. In January, Tesla cut prices in China for the second time in three months to stay competitive.

EV dynamics are shaking up the self-satisfied legacy-vehicle makers and their oligopolistic behavior in America. And they’re now spooking automakers in Japan.

Toyota, the world’s largest automaker, has completely missed battery EV mobility, opting instead for hydrogen fuel-cell vehicles. It built some EVs. But they are based on models designed for internal combustion engines and retrofitted with electric power trains, which is expensive and not ideal for a number of reasons. And so Toyota is disappointingly left behind. The push came “really,” so to speak, last week, when incumbent Aiko Toyoda was replaced as CEO.

But now Toyota is years behind. Other automakers have made similar mistakes in getting started with EVs, including BMW, whose pricing of sports sedan Tesla is in the bull’s eye, and whose CEO was replaced in 2019 for lagging competitors in the EV space.

For the auto industry as a whole, EVs are the only area where sales are growing very fast. Sales of vehicles with internal combustion engines have slackened,

The old auto industry needed a shake-up. And to Musk’s credit, he rocked them. But now they’re awake, and they’re demons, and they’ve got dharma because their lunch is being eaten. In Ford’s case, it was the threat of Tesla’s Cybertruck that did it. If Ford loses its pickup sales, so is it as an automaker.

Ironically, the Ford F-150 Lightning is out now, with real people driving them, while the Cybertruck still doesn’t exist, and may not enter mass production until 2024, if ever.

EV startups in the US – despite consuming billions of dollars in investment – ​​still haven’t made much inroads into mass-producing EVs. Even Rivian, the most successful of startups, still operates in relatively small numbers.

But Rivian has pickup. And Tesla doesn’t. And the GM doesn’t either and is instead stumbling from empty declaration to empty declaration. Toyota isn’t even thinking about making an electric pickup. Stellantis is finally thinking about it and in early January unveiled an electric Ram model that will probably go into production in 2024. In the US, ICE pickups have been massive sellers and money makers with huge profit margins for years. So it should be interesting.

The mass arrival of EVs to shake up the self-satisfied oligopolistic legacy of legacy-automakers is a big deal for the US economy. With hundreds of billions of dollars being invested in the US in EV production, this is a big deal. For consumers, more choice, more competition and slashing prices is a good thing.

But that doesn’t bode very well for shares of current or future EV makers, which fell today including Ford (-2.6%), Tesla (-4.8%), GM (-3.6%), Stellantis (-2.6%), and Rivian (-2.6%). (-8.2%). The post-SPAC stocks of EV manufacturers who are mass producing EVs instead have already been liquidated.

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