Last month,
Tesla made one of the biggest price drops in TV history slashing its model y by nearly
20%.
The move sent shockwaves through the auto industry.
A few weeks later,
Ford made its own price cut on the electric mustang mach E analysts and experts have
been watching to see if other carmakers will follow while these price cuts are good news
for consumers.
It could also be a sign that the tide is changing in the E V industry.
So what can Tesla and Ford's price changes?
Tell us about the future of the E V market.
Sticker price cuts across the company's lineup or on a specific vehicle are quite rare in
the auto industry though not unheard of most automakers use incentive campaigns
that can change from month to month to lower prices.
Tesla and Ford's price cuts surprised many in the industry because prices have been
steadily increasing for the last year or so.
The costs of making the battery and some other parts of the E V are just
steadily increasing as well.
So to absorb those rising costs,
compass have had to increase their prices on some vehicles supply chain constraints
pinched inventory and drove prices higher.
In addition to rising commodity costs,
the amount that Tesla slashed off its prices also came as a surprise,
analysts agreed that it was really a move to grab market share.
Tesla is already the number one seller of tvs in the US.
But you know,
they have ambitions to sell even more vehicles than they do right now.
Tesla said it wanted to lower prices enough to qualify many models for 7500
dollars federal tax credit to lure in new buyers.
Though.
On February 3rd,
the treasury department said it will relax its rules classifying cars like the Tesla model,
Y and Ford Mach,
E as SUVs,
which should qualify most of those models for that federal tax credit even at their original higher
prices the next day,
Tesla upped the price of the model Y by one or $2000 depending on the model,
but prices are below where they were in January before the steep cuts price really
matters.
I think there's just a vast number of people that want to
buy a Tesla car but can't afford it.
And,
and so these price changes really make a difference.
They have the scale and really the wiggle room and their operating margins where they can make bigger
cuts on their vehicles.
So when they slash 20% off of a vehicle,
it doesn't automatically mean they're losing a lot of money on these vehicles,
but Ford is in a different situation though.
It's the number two E V seller in the U S.
It still lags way behind Tesla in market share.
The competitor like Ford that has slimmer margins to work with.
They might be losing money on their vehicles when they cut prices.
Ford made their first all electric SUV Mustang Ford executive last
year said that it's Maki was losing money because of the rising costs
around the battery,
which is the most expensive part of the E V.
You're going to see pressure on the bottom line when we launch our tvs,
right?
They're not going to be positive.
We've said that Ford said it's been able to reduce prices on the
marquee because its supply chain is more efficient now and production costs are coming down.
They definitely are chasing Tesla and you know,
they have a large gap to make up to get to that and clearly with their response just in the
last week or so.
They think it's important to be competitive with Tesla on the pricing front as the
market leader,
Tesla can make pricing decisions that put pressure on competitors.
But so far Ford is one of the only companies that responded with its own price cut
for companies like GM and Volkswagen.
And you know,
we may be hearing from others.
They've been saying we see the price cuts but we're staying our ground and we don't
think it's necessary to adjust our pricing at all.
We have high demand with where we're currently priced.
And that's that some analysts have called Tesla's price cuts an attempt starting an
E V pricing war.
But the lack of action so far from most carmakers suggests that it might be too soon to
tell,
we'll have to see how pricing moves in the next few months.
But for now,
I'd say,
you know,
it's competitive.
There's definitely some tension companies are making strategic shifts,
but it doesn't seem for now like a full on price war is breaking out.
But there is tremendous pressure on TV sellers right now to poach as many customers as they can from
Tesla and keeping prices competitive is an effective tactic.
What's keeping customers from buying an E V price price is a big thing?
So it's just another tool that some companies are using to try to lure in new
buyers in this increasingly cutthroat environment.
So what does all of this mean for the E V market?
The takeaway for customers right now is hopefully,
you know,
you've got a few more affordable E V options to buy from.
And maybe this means that there will be some change in pricing on other models and the
future for other brands.
Prices could also increase throughout the year,
especially if battery costs keep rising already.
We've seen some slight increases on some Tesla models
because Elon Musk has said that demand is so great that they've been able to bump up those
prices really slightly.
So an E V pricing war hasn't broken out just yet.
But analysts and experts say they will be watching earnings calls in the coming months to see how the price
cuts affect Tesla and Ford's bottom line.