The two don’t cut it in the EV price war.
Ford slashed the price on its plug-in Mustang Mach-E car last Monday, weeks after Tesla slashed prices of all models by up to 20 percent. The motor industry seemed to be on the verge of further cuts to electric vehicles. Headlines announced that the price war was on.
Then other car manufacturers stayed on the sidelines. General Motors Chief Executive Mary Barra said on Tuesday that the company’s EVs have been priced right. Volkswagen declined to cut prices, as did Hyundai and Kia.
For now, say industry analysts, EV prices are likely to stay where they are. “This is not a price war, this is a territorial skirmish,” said Tyson Jomini, vice president of data and analytics at JD Power.
The prices of EVs will increase in 2022 as chip shortages, rising battery material costs and higher petrol prices drive demand. They are significantly more expensive than cars and trucks with conventional engines.
Making them more affordable is important to attract more buyers. In the US, the Biden administration has set a target of making half of all new vehicles sold in the US electric by 2030.
Subsidies of up to $7,500 are a significant selling point for American car buyers. On Friday, the US Treasury helped ease the pressure on carmakers to cut prices, however, when it changed its interpretation of the Inflation Reduction Act climate law to allow more high-priced EVs to qualify for consumer tax credits. to be allowed to qualify.
Tesla fired the first shot in this skirmish about three weeks ago. It cut prices in the US and Europe by a fifth, after slashing prices for the second time in China for the first time. The models sold in the US have received a price drop of $13,000.
Tesla dominates EV sales in the US, but more competitors are entering the market. Elon Musk’s company could account for 72 percent of the 487,000 new EVs sold in 2021, according to Kelley Blue Book research. The manufacturer’s market share fell to 65 percent of 810,000 electric vehicles a year later, even as its own sales nearly halved.
New competitors coming to Tesla [the price cut] That was the weapon they used to counter that,” said Cox Automotive analyst Michelle Krebs.
Tesla’s best-selling crossover sport utility vehicle, the Model Y, competes directly with Ford’s Mustang Mach-E. Ford plans to sell 39,000 Mac-Es in 2022 — the best sales performance for any electric model not made by Tesla — but Tesla sold more than six times as many Model Ys.
The Model Y now starts at $53,000, down from $66,000. The six versions of the Mach-E now sell for between $46,000 and $64,000, with the price dropping 1 percent for the low-end specification and 8 percent for the highest.
Ford plans to boost production of the Mach-E this year, even as it grapples with supply chain problems, and more Mach-S to sell. The company needs to maintain prices even with a major competitor. gives a reason. “They want to keep the momentum going,” Krebs said.
Yet Ford has raised the price of the F-150 Lightning, the electric version of its flagship truck, three times. It now starts at $56,000 and has a long waiting list.
Morgan Stanley analyst Adam Jonas argued last week that the supply of electric vehicles is likely to exceed demand in 2023. He pointed to Tesla’s price cut, the falling price of used Teslas, lower reservations at Lucid Motors and a possibly lower order backlog at Rivian. Who stopped giving reservation information. Rivian said Wednesday it plans to cut 6 percent of its workforce.
Jonas said Tesla’s price cuts will force traditional carmakers to recalculate how long it will take their EV strategies to pay off. For new EV makers, the price cut “raises important questions of burn-rate versus capital sources and long-term business model viability”.
“Everyone will need to cut price, but we don’t think everyone will be able to cut costs and fund the business without significant capital increases,” he added.
Carmakers are certainly vying for customer loyalty during this technology shift, as today’s buyers are more likely to stick with them when they buy their second electric vehicle, said Nick Nigro, founder of Atlas Public Policy, a research firm. Let’s keep
The 10-year horizon of the consumer tax credit in IRAs also gives manufacturers some assurance that the market will grow over a decade, which may make them “willing to make less money in the short term to make more money in the long term.” Said the Negro.
Under the IRA’s subsidy rules, cars must have a manufacturer’s suggested retail price of $55,000 or less, with the cap rising to $80,000 for vehicles classified as large clean-energy SUVs, trucks or vans.
However, carmakers complained that the US government was classifying some SUVs as cars, meaning they were subject to a lower limit of $55,000.
Confusion over the two categories led to some large EVs, including Tesla’s Model Y, being ineligible for the credit because they were subject to a $55,000 price cap instead of the higher cap of $80,000.
The changes announced by Treasury will move more cars, including the Model Y and Mach-E, into the SUV category, meaning they can qualify for the credit if they cost less than $80,000 instead of $55,000.
Nigro said it’s too early to tell how competition among carmakers will play out this year because the federal tax credit is changing so much of the marketplace. But so far he does not see any decrease in the demand for electric vehicles. “There’s not that big of an incentive for a manufacturer to drop their prices.”