Ford鈥檚 Jim Farley Says Tesla Could Start an EV Price War
Comments Come After Tesla's Recent Price Cuts
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said rival Tesla Inc. could start a price war and turn certain electric vehicle models into commodities after it cut prices for the second time in a month this past week.
Tesla鈥檚 moves to bolster growth are 鈥渃ompletely rational and should surprise no one,鈥 Farley said at a charity event in Detroit. 鈥淧rice wars are breaking out everywhere. Who鈥檚 going to blink for growth?鈥
The recent cuts hurt Tesla鈥檚 margins, sending shares into a tailspin. They are also reverberating around the auto industry as long-established companies race to catch up to the electric carmaker. The price reductions create challenges for rivals, who haven鈥檛 established supply chains and vehicle production as advanced as Tesla鈥檚.
Farley went on to say that Tesla CEO Elon Musk is using the Model T strategy employed by Ford founder Henry Ford, who cut the price of the Model T in half to protect market share. He was still passed up by Chevrolet, Farley said.
惭耻蝉办听
The other problem is that Tesla, by cutting prices on midsized crossover SUVs, could turn the industry鈥檚 most popular-sized vehicle into a commodity. Ford already reduced the price of its Mach-E electric crossover to match the Austin, Texas-based carmaker鈥檚 discounts. The Mach-E competes with Tesla鈥檚 Model Y.
Ford raised the price of its electric Lightning Pickup, for which Tesla has no direct rival, by 50% to $60,000 since it launched in April 2022.
Farley said the key to avoiding price wars is offering products that have little or even no competition. Ford is already developing a second generation of its electric F-Series truck that will be manufactured at a new factory in Tennessee by the middle of the decade.
Pricing Pressure
Tesla cut prices of all models by about 20% this year as demand has softened. It鈥檚 also ramping up production at plants in Austin and Berlin, which will give it even more inventory to sell.
On the company鈥檚 earnings call, Musk indicated he would keep pricing pressure up, saying he was prioritizing sales volume over profits margins.
鈥淲e鈥檝e taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin,鈥 he told analysts.
Tesla鈥檚 operating margin shrank to 11.4% in the first quarter, a roughly two-year low, after the company marked down its electric vehicles in January and March. Musk said he鈥檚 comfortable making less money on each car sold.
With assistance from Dana Hull.
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