According to Automotive News, Ford Motor Co. has closely followed Tesla's price cuts in the U.S. market, cutting the price of the Mustang Mach-E electric car by $600 to $5,900, with price reductions varying by model. In the face of Tesla's fierce price reduction offensive, different car companies have different attitudes.
Ford is very passive
On January 30, Ford Motor announced that it would significantly increase production of the Mach-E in 2023 and reduce the price across the board. Ford officials are full of confidence in this price cut. Carrigi Kellington, Executive Vice President of Ford Motor Credit North America, said: "This offer is straightforward and competitive enough to attract more customers. ”
"Price cuts came faster and more brutally than expected. Tesla's goal may be to squeeze competitors out of the market. Anthony Weir, partner at consulting firm Simon-Kucher & Partners, said.
Forbes pointed out that Tesla Motors gross margin in the fourth quarter of 2022 was 25.9%, so it was able to generate considerable profits while cutting prices, while other automakers such as Ford lack such room for price reductions.
"Tesla's profit margins are higher than other automakers such as General Motors and Ford Motors, which provides a cushion for its further price cuts." Bank of America analyst John Murphy said this month that "at the moment, most automakers are losing money in electric vehicles, and while they try to increase electric vehicle production, price cuts may make their business tougher." ”
Forbes believes that Ford's price reduction is more a passive measure taken in response to Tesla's price cut, in order to maintain its own market share. Marlene Gaia, chief customer officer for Ford's electric vehicle division, said, "Our competitors are also adjusting prices. When we want to remain consistently competitive in the market, we have to act. ”
Gaya noted that Ford is working to improve the Mach-E's profit margins, but she wouldn't say whether the model is already profitable. "We definitely want to be profitable, so we're constantly improving the design of the car, trying to reduce costs." Earlier, Ford Motor said that Mustang Mach-E was no longer profitable, and Ford's price reduction strategy was to reduce the cost of unit products by expanding production scale to ensure that there was no loss.
The reporter believes that the price war is undoubtedly a challenge for car companies. From the perspective of consumers, the price war may prompt car companies to provide more cost-effective products.
GM, Volkswagen, Renault do not follow suit
In the fourth quarter of 2022, GM's revenue rose 28% year-over-year to $43.1 billion, above analysts' forecast of $40.5 billion. In 2022, GM's adjusted EBIT reached a record high of $14.5 billion. GM expects earnings momentum to be maintained this year thanks to higher production, so it is not worried that profit margins will be affected by the electric vehicle price war.
GM CEO Mary Borla said GM will keep a close eye on the market, but there is no need to lower the price of electric cars or other cars.
GM believes that as supply chain problems during the new crown epidemic gradually ease, demand for SUVs and trucks with the company's highest profit margins will continue to grow, and vehicle production will also increase. Borla told analysts, "We've seen a lot of interest from our products and we think the current selling price is at a reasonable level." She also stressed that GM is accelerating production of the latest electric vehicles, including the Hummer electric pickup, the Hummer electric SUV and the Cadillac Lyriq.
From 2022 to the first half of next year, GM is expected to produce 400,000 electric vehicles in North America. In addition to its current three-battery factory plan, the company will continue to invest in new battery capacity. In a conference call with analysts, Bora said, "We need a fourth battery factory, and more factories after that." GM expects EBIT margins to stabilize between 8% and 10% through 2025, despite Tesla's price war in electric vehicles. The company also expects electric vehicle revenue to reach $50 billion by 2025.
Volkswagen Group CEO Oliver Bloom said the Volkswagen Group does not plan to offer discounts for its electric vehicles in response to Tesla's price cuts.
"We have a clear pricing strategy. In addition, we focus more on product reliability, and we also believe in our product and brand strength. Bloom also noted that the Volkswagen Group wants to be a global leader in electric vehicles, but that goal should be achieved through profitable growth.
In addition, according to the Detroit Times, according to the information revealed by dealers, the Porsche brand of the Volkswagen Group is even considering raising the price of its cars by up to 6%. A Porsche spokesperson said: "It is industry practice for automakers to adjust the price of each model every year. "He did not disclose the price increase and the model that increased the price." We expect to announce adjusted prices in March. ”
With the exception of the Volkswagen Group, Renault has no plans to lower the price of its electric vehicles. "If you cut prices by 10% or more in a week, it affects residual value and hurts existing customers." Farebris Cumbliff, head of Renault cars, said: "The most important thing for us is stability. But it is foreseeable that the price of electric vehicles will be closely watched for some time to come. ”