Well, the electric car price war may have begun.
last month Tesla discounts Up to 20% off EV manufacturer vehicle purchase costs. Then, in a rare move, Ford discounts the Mustang Mach-E up to 9% last week.
While those may have been a few of those first dramatic shots through the bow, they’re almost certainly not the end of it. Recent financial updates from Ford, Tesla and others show growing pressure electric car discount-or at least stop feeding them.
And from a flurry of recent corporate financial updates over the past week, automaker executives and industry analysts have had some more sobering comments on what that means. . Among them: It will take cost cuts for parts, better production efficiency and, in some cases, increased production of gasoline trucks to get there.
Right. In a US market report released last week, S&P Global Mobility highlighted an important point: the fact that established automakers — especially the US Big Three need high profits. from full-size pickup trucks to back their investments in electric vehicles.
Ford F-150 Lightning 2023
Set EV ramp on ICE
“GM is the only one of the three that has the increased capacity to manufacture more full-size pickup trucks—whether they be ICE or BEV,” said S&P Global Mobility. “Ford is limited in capacity until Blue Oval City comes online in the second half of 2025 and Stellantis has its own limitations in the short term.”
S&P also highlighted another reason, besides higher interest rates and generally weaker demand, will put downward pressure on prices: Many owners of vehicles that have purchased in the past few years owe more than the car’s value will be worth. Be traded.
“These vehicles are all underwater,” said Dave Mondragon, vice president of product development at S&P Global Mobility. “They sell for record high prices with no rebates, and there will be little or no capital to buy a new car.”
On the contrary, the pressure to be more competitive on electric vehicle prices will create more pressure on companies to ramp up production of electric vehicles to meet demand and soon achieve profitability on EV models.
Auto supply companies are bracing for increased pressure from automakers to reduce costs following remarks made during financial calls over the past few weeks. Tesla CEO Zachary Kirkhorn, on Tesla’s call, said they were “attacking every other cost area,” specifically targeting suppliers.
2023 Tesla Model Y – Courtesy of Tesla, Inc.
Protracted production problems
At the same time, the companies are still dealing with a series of problems that are preventing them from selling electric vehicles in the quantities expected. Nissan will report delivery less Ariya trams in the next few months than expected by US dealers, as a result of chip shortages.
GM appears to be somewhat constrained by its own battery production, through its Ultium Cells LLC joint venture with LG. CEO Mary Barra confirmed last week that the cumulative 400,000 electric vehicle target for North America has been pushed back to mid-2024, rather than the end of 2023 as previously stated.
Barra pointed to staffing issues at the Ohio battery plant, the first of three North American battery plants specializing in the production of large format bag cells developed in conjunction with LG. The fourth battery plant is yet to be detailed and the company emphasize that it is flexible on pin format despite its investment.
Chevrolet Equinox EV 2024
GM this week indicated it plans to launch, in the second half of the year, Blazer EV and Equinox EV models, the latter of which will start at around $30,000.
EQUAL auto news reported last week, Volkswagen has no plans to counter the recent price cuts. That’s a bit of a contradiction to what VW has said before, as price flexibility has always been one of the purported advantages of the MEB platform for millions of electric vehicles.
2023VolkswagenID.4
However, Volkswagen Group’s cousin Porsche is considering a reduction in electric vehicle prices, AN reports, while Renault’s brand boss expressed concern that a sales cut from 10% or more within a week will affect residual (resale) value and harm existing customers.
Tesla is once again driving massive output gains in 2023, and it continues to adjust prices faster than the industry’s usual response. For instance, it offered a $1,000 price increase to the Model Y last week, just one Clarification of EV tax credit from Ministry of Finance that makes the entire Model Y range eligible.
Prices fall a bit, demand for electric vehicles increases
The big picture, interest and demand for electric vehicles shows no sign of abating. But as Tesla recently illustrated with the increase in demand that comes with the price drop, it is closely tied to price and has huge pent-up demand for a wider range of more affordable EVs.
Ford Mustang Mach-E at Drammen port, Norway
In addition to Tesla, each full-line automaker will need new solutions to keep or reduce prices, as well as ramp up their existing production of electric vehicles, many of which simply weren’t originally conceived to be. sold in such large quantities.
The latter is perhaps most clearly represented by Ford, which has supported EV production with special measures such as air-shipping parts to meet demand—admittedly disappointing in terms of sales. dismal financial results, but deflected that this will help build market share.
Next-generation EV platforms, like BMW’s The Neue Klasse model and Ford next generation electric truck, is being conceived for products manufactured to a greater extent than EVs today. But in the meantime, we could see more of such “no pain, no gain” moments for full-line automakers.
