- Ford Price reduction announced for it Electric vehicles Shortly after Tesla did the same.
- The moves don’t make sense, but Tesla’s greater scale gives it a near-term advantage, BofA said.
- Overall, strategists said price cuts in the EV market could result in higher sales volumes.
Tesla Starting from 2023 Reduce the value of your vehicle As 20%, and this week Ford He did the same for his electricity Mustang Mach-E model range.
Neither move makes much sense, according to Bank of America, although Tesla still holds a near-term advantage, bank analysts said.
“The logic seems strange to us,” the strategists wrote in a note on Tuesday. “Both TSLA and Ford are citing demand outpacing supply, which means cutting prices will directly hit the bottom line today and unnecessarily reduce future earnings power.”
On the one hand, Elon Musk’s decision for Tesla could be driven by slowing demand or his target 50% growth rate, although BofA said this view is still unique.
But for Ford, to meet its sales volume targets and maintain profitability, the legacy automaker will have to produce and sell about 33% more vehicles than expected due to price cuts, Bank of America estimates. If that extra capacity isn’t possible then reducing the price of the vehicle is a risky move.
The company said in a statement that it expects to produce 130,000 units of it Mustang Mach-E This year, revised from the previous target of 78,000.
“We are responding to changes in the market,” said Ford’s chief customer officer Marin Gajaja said At a media briefing. “We want to stay competitive in the market.”
Gzaza said Ford’s price cuts are not a direct response to Tesla’s move.
BofA said the two companies are unlikely to start an all-out price war reminiscent of the early 2000s, when General Motors It was pushed towards bankruptcy. Automakers are in a better position today, with strategists concluding that a bad actor will not be able to destroy competitive pricing.
However, Bank of America said the auto industry doesn’t always act rationally, hence the recent price cuts. Given the relative newness and small size of the EV market, obstacles are bound to emerge, making an already challenging business even more so.