Ford is slashing the price of its electric Mustang Mach-E by an average of $4,500 (R77,992) after Tesla’s price cuts, stepping up the price wars in a slowing EV market.
The discount comes on a model Ford has already described as unprofitable, but the carmaker said it hopes to offset further margin deterioration by boosting production 67% this year. The lowest priced Mach-E now starts at $45,995 (R797,166), down $900 (R15,598), while the largest cut comes in the GT Extended Range version, which falls $5,900 (R102,266) to start at $63,995 (R1,109,244).
The move, with discounted financing rates of 5.3% on the Mach-E, is meant to counter Tesla’s decision to cut prices across its line-up by 20%. It also brings the Mach-E in line with new caps on EV prices to qualify for federal tax credits of up to $7,500 (R129,999) under the Inflation Reduction Act. The fight to win buyers comes as analysts predict the pace of growth for EVs will slow this year.
“Our competitors are also adjusting their prices,” chief customer officer for Model e, Ford’s EV unit, Marin Gjaja told reporters. “As we look and want to stay competitive in the marketplace, we’re having to respond.”
CFO John Lawler said in June profits on the Mach-E had been “wiped out” by rising commodity costs. The carmaker responded by raising prices on the Mach-E to reduce losses.
“You’re going to see pressure on the bottom line when we launch our EVs, they’re not going to be positive,” Lawler said at the Deutsche Bank automotive conference.
Gjaja said Ford is working to improve margins on the Mach-E but wouldn’t say if the model has become profitable.
“We want to make money. We are re-engineering the vehicle on a perpetual basis to try to get cost out.”
The Mach-E’s business case will also improve by boosting production this year to 130,000 models from 78,000 last year, Gjaja said. The Mach-E factory in Cuautitlan, Mexico, is idled as the carmaker retools to expand capacity. It will be back online in February.
“We’re seeing real improvements in our cost position as a result of scaling up production and we’re seeing some relief on some commodities,” Gjaja said.
Ford is investing $50bn (R866.6bn) to develop and build electric vehicles and plans to produce two-million a year by the end of 2026. The Dearborn, Michigan-based carmaker was the No 2 seller of EVs in the US last year, well behind Tesla, which controls almost two-thirds of the market.
With a gross automotive margin of 25.9% in the fourth quarter, Tesla can cut prices while still generating healthy profits. Ford lacks that breathing room, analysts say.
“Tesla has higher margins than other OEMs, including GM and Ford, and cushion to lower prices even further,” Bank of America analyst John Murphy said earlier this month.
“Most OEMS are losing money on EVs and these price cuts are likely to make business even more difficult just as they are attempting to ramp production of EV offerings.”
More stories like this are available on bloomberg.com
Ford cuts price of electric Mustang Mach-E in response to Tesla
Image: Supplied
Ford is slashing the price of its electric Mustang Mach-E by an average of $4,500 (R77,992) after Tesla’s price cuts, stepping up the price wars in a slowing EV market.
The discount comes on a model Ford has already described as unprofitable, but the carmaker said it hopes to offset further margin deterioration by boosting production 67% this year. The lowest priced Mach-E now starts at $45,995 (R797,166), down $900 (R15,598), while the largest cut comes in the GT Extended Range version, which falls $5,900 (R102,266) to start at $63,995 (R1,109,244).
The move, with discounted financing rates of 5.3% on the Mach-E, is meant to counter Tesla’s decision to cut prices across its line-up by 20%. It also brings the Mach-E in line with new caps on EV prices to qualify for federal tax credits of up to $7,500 (R129,999) under the Inflation Reduction Act. The fight to win buyers comes as analysts predict the pace of growth for EVs will slow this year.
“Our competitors are also adjusting their prices,” chief customer officer for Model e, Ford’s EV unit, Marin Gjaja told reporters. “As we look and want to stay competitive in the marketplace, we’re having to respond.”
CFO John Lawler said in June profits on the Mach-E had been “wiped out” by rising commodity costs. The carmaker responded by raising prices on the Mach-E to reduce losses.
“You’re going to see pressure on the bottom line when we launch our EVs, they’re not going to be positive,” Lawler said at the Deutsche Bank automotive conference.
Gjaja said Ford is working to improve margins on the Mach-E but wouldn’t say if the model has become profitable.
“We want to make money. We are re-engineering the vehicle on a perpetual basis to try to get cost out.”
The Mach-E’s business case will also improve by boosting production this year to 130,000 models from 78,000 last year, Gjaja said. The Mach-E factory in Cuautitlan, Mexico, is idled as the carmaker retools to expand capacity. It will be back online in February.
“We’re seeing real improvements in our cost position as a result of scaling up production and we’re seeing some relief on some commodities,” Gjaja said.
Ford is investing $50bn (R866.6bn) to develop and build electric vehicles and plans to produce two-million a year by the end of 2026. The Dearborn, Michigan-based carmaker was the No 2 seller of EVs in the US last year, well behind Tesla, which controls almost two-thirds of the market.
With a gross automotive margin of 25.9% in the fourth quarter, Tesla can cut prices while still generating healthy profits. Ford lacks that breathing room, analysts say.
“Tesla has higher margins than other OEMs, including GM and Ford, and cushion to lower prices even further,” Bank of America analyst John Murphy said earlier this month.
“Most OEMS are losing money on EVs and these price cuts are likely to make business even more difficult just as they are attempting to ramp production of EV offerings.”
More stories like this are available on bloomberg.com
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