Ford announced Monday it will both boost production of the Mustang Mach-E battery-electric vehicle while reducing prices for the EV “across the board.”
The move comes at a time when industry analysts see growing competition among automakers as they begin migrating from internal combustion engines to battery-electric powertrain technology. And it follows sharp price cuts by the EV market leader which has helped Tesla boost demand in recent weeks.
While Ford did not offer specific production targets for the Mach-E, it said output would grow “significantly.” As for pricing, the cuts range a low of $600 to as much as $5,900, depending upon the model.
Going mainstream
“We are not going to cede ground to anyone,” said Marin Gjaja, chief customer officer, Ford Model e, the side of the company focused on battery-electric vehicles. “We are producing more EVs to reduce customer wait times, offering competitive pricing and working to create an ownership experience that is second to none.”
From a niche segment of the market, EVs are beginning to go mainstream. They represented less than 1% of total U.S. new vehicle sales in 2019, rising to 5% for all of 2022. And forecasts run as high as 20% by 2025.
So far, Tesla has overwhelmingly dominated the U.S. EV market, but its share slipped from 79% in 2020 to 65% last year, according to industry data. But the Texas-based manufacturer moved aggressively to build demand late last year, rolling out a series of incentives subsequently followed by price cuts of as much as 20 percent. That has translated into surging demand this month, preliminary data indicate. In turn, that has competitors scrambling.
EV price war?
“I don’t know if I’d describe it as a price war,” said Sam Abuelsamid, principal auto analyst for Guidehouse Insights, but there is clear pressure on competitors like Ford to respond to Tesla’s move.
“We’re seeing more competition (in the EV market) as more and more models come to market from a variety of manufacturers as everyone is increasing production capacity,” said Abuelsamid. “That’s going to put pressure on everyone.”
No more “compliance cars”
The Mustang Mach-E is Ford’s first battery-electric vehicle and marked a significant shift in the automaker’s approach to electrification. The original plan was to offer a “compliance car,” a derisive industry term for EVs developed solely to meet strict California zero-emission vehicle standards, with little likelihood of generating sales in other parts of the country. But, halfway through the program, Ford officials reassessed plans and decided to give the electric crossover a more aggressive design and sportier performance and handling.
The decision to also name it “Mustang” also generated some initial pushback from owners of the classic Mustang coupe. But the overall package, which went on sale in December 2020 as a 2021 model, has clicked with consumers. It was the third best-selling EV in the U.S. last year, though lagging well behind the segment leaders, Tesla’s Model 3 sedan and Model Y SUV.
As with the even newer Ford F-150 Lightning, sales have been limited by low production. In turn, output has been restricted by shortages of semiconductors and other key components. And manufacturers like Ford have felt the impact of surging prices for raw materials such as lithium, cobalt and nickel.
Manufacturing costs coming down
The good news for automakers like Ford, noted analyst Abuelsamid, is that the cost of some of those raw materials, has begun to settle back, giving them a little breathing room. Meanwhile, as production increases, Ford — like its competitors — hopes to take advantage of classic economies of scale, further trimming the cost of assembling a vehicle like the Mach-E.
EV sales are becoming increasingly important to Ford, the automaker breaking its automotive business operations into two separate entities, with Model e focused on electrified products. They still represent a small share of Ford’s overall sales, 61,575 of the more than 1.9 million vehicles that the automaker sold in North America last year. But where overall volume was down 2.2%, EV sales rose 126 percent.
Ford has promised to break the bottlenecks and boost output for both Mustang Mach-E and the F-150 Lightning. It is expanding capacity at the Dearborn, Michigan plant building the pickup from an original 25,000 to 150,000 this year.
It has not said what it is targeting for the Cuautitlan, Mexico plant building the Mach-E, but total sales of the electric SUV came to 39,458 in 2022.