The price war on electric vehicles is heating up.
Ford Motor Co. (F) lowered prices todays of its flagship EV, the Mustang Mach-E, as it ramps up production of the vehicle.
Production of the Mach-E in 2023 will increase to 130,000 vehicles, adding 52,000 Mach-Es, said Ford CEO Jim Farley on Twitter in response to a question.
"Hi Joel, for Mach-E we're targeting 130,000 units this year. Up from 78K in '22," he tweeted.
The strategy will allow the company to lower its expenses.
"Scaling will shorten customer wait times. And with higher production, we’re reducing costs, which allows us share these savings with customers," Farley said.
Shares of Ford fell by as much as 1.66% after the carmaker said it would lower prices.
"We are not going to cede ground to anyone," said Marin Gjaja, COO for Ford Model e.
Ford said it would cut Mustang Mach-E prices across the board with an 8.4% reduction pegged for the extended-range GT version, which is a decrease of $5,900 to $63,995.
Extended range battery costs will decline by 18.6% to $7,000.
The price cut by Ford will encourage other EV manufacturers to slash their prices also, said Dan Ives, an analyst with Wedbush.
"Ford just cut Mustang EV prices in response to Tesla’s price cut," he tweeted. "Mini price war about to begin with EVs in the US with Tesla’s shot across the bow on price cuts."
Tesla Cut EV Prices First
Tesla TSLA, which leads EV sales in the U.S., started lowering the price of its Model 3 and Model Y vehicles in China last October, with similar reductions unveiled in the U.S. shortly after. The prices were cut again in January after Tesla posted disappointing December quarter delivery figures.
The automaker slashed the price of its Model 3 and Model X sedans, along with the Model Y crossover by between 6% and 20% for U.S. customers, pegging the Model 3 at just under $53,000.
Tesla CEO Elon Musk said the price cuts were a big reason for a January demand surge which he said was twice the pace of production and "the strongest in our history".
Tesla shares fell by as much as 4.35% from their best week since 2013 to change hands at $170.17 each.
Ford will publish its fourth quarter earnings after the close of trading on Feb. 2 as analysts are looking for an adjusted bottom line of 0.62 per share, a 138% increase from last year, on revenues of $40.37 billion.
Last October, Ford clipped its guidance for full-year profits to around $11.5 billion, down from a prior estimate of between $11.5 billion to $12.5 billion, but said free cash flow is likely to rise to between $9.5 billion and $10 billion.
Morgan Stanley analyst Adam Jonas said the value of Tesla's shares can turn around after it declined by 36.94% within the past year.
"...are the lows on $TSLA in for this year? I'm not so sure about that .. we see FY23 as a year where auto price inflation turns to deflation .. we could see Tesla test new lows in the first half (our updated bear case is $70) before exceeding our $220 .. target,” he said.
He forecasts that Tesla will sell 7.2 million vehicles by 2030 and grow total revenue at a 24% 8-year compound annual growth rate.
The move by Tesla to lower prices is "just the latest sign the EV market may be entering the ‘shake-out’ phase," he wrote. "We reduce exposure across the EV portfolio, while making Tesla our Top Pick."
