On May 4th, it was reported that the price war in the electric vehicle market is escalating and Jim Farley, CEO of Ford Motor Company, expressed concern about this trend. He is not willing to continuously lower the price of electric vehicles to compete with Tesla.
Earlier this week, Ford announced a second price cut this year on its electric crossover Mustang Mach-E in response to a series of price cuts by Tesla since January. The highest price cut was $4,000, which is an 8% reduction. The Mach-E is Ford’s first pure electric car and competes directly with Tesla’s Model Y.
Last week, Farley compared Tesla’s price war in the electric vehicle market to a series of price cuts that Henry Ford, the founder of Ford, made to the Model T in 1913. He reiterated his point at a recent Wall Street Journal forum, stating that Henry Ford’s strategy eventually put Ford Motor Company in crisis.
“You don’t want to cheapen the product, the resale value of those who bought it at a higher price is terrible, and they will never forget it,” Farley said. He pointed out that Ford will follow Tesla’s price cuts for models such as the Mach-E, “but we have a bottom line.”
He did not elaborate on what this bottom line is, but considering that Ford’s electric vehicle business lost $722 million in the first quarter of 2023 and is expected to lose $3 billion this year, the carmaker is obviously unwilling to further reduce prices. If Tesla continues to lower prices, Ford may not be able to keep up with the pace unless it is willing to use profits from its traditional internal combustion engine and commercial vehicle businesses to support the electric vehicle price war.
Farley also mentioned an interesting point in the interview that Ford has no plans to give up Apple CarPlay, which is completely opposite to General Motors. The latter recently announced that it will gradually phase out CarPlay and Android Auto in future models. Farley explained that Ford “lost that war ten years ago,” referring to streaming media entering cars, and he added that “70% of Ford’s customers in the US are Apple users.”
