With a price war over the cost of battery-electric vehicles heating up across the industry, Ford has succeeded in cutting as much as $5,000 from the cost of building its Mustang Mach-E.
The competition for BEV sales has become particularly intense in the compact CUV segment where the dominant Tesla Model 3 faces pressure from Mach -E and new entrants such as the Volkswagen ID.4 and soon-to-arrive Chevrolet Blazer EV with prices below $40,000 with federal tax credits included. An average new car costs nearly $50,000.
The cuts in the Mach-E price come after top Ford executives, including CEO Jim Farley and chief financial officer John Lawler, visited China, where even less expensive vehicles from companies such as BYD are coming on the market.
Explaining how Ford settled on the $5,000 price cut, Lawler says during a conference call with analysts after release of the company’s first-quarter earnings: “We're using the digital connectivity of the vehicle to understand what features customers find valuable. And if they're not using something that we have on the vehicle, we can design that out.”
Lawler (pictured, left) adds Ford’s reorganization, which has created a separate EV-only unit called Model e, is also helping uncover potential cost savings, including the use of less expensive batteries, throughout the Mach-E program. “We didn't wait on Mach-E. So, we started to put together what we thought of as bundled actions into minor programs as we work through Model e, and we're launching those as we go through the year this year and into next year to get us to that $5,000 reduction.”
The “negative margins” around BEVs – Ford acknowledged losing $700 million on battery-electrics in the first quarter – are also spurring the search for cost savings.
“In fact, we expect Model e’s contribution margin to approach break-even this year, and we continue to target positive EBIT margins for our first-generation vehicles by the end of 2024,” says Lawler.
As Ford cuts prices on Mach-E, it also is increasing targeted range for the standard-range model to an EPA-estimated 250 miles (403 km) for rear-wheel drive and 226 miles (364 km) for all-wheel drive.
The standard-range models will now be powered by lithium-iron-phosphate batteries. This change allows the eAWD configuration to gain an additional 45 hp and improves the targeted EPA range estimates for both RWD and eAWD configurations.
In addition to increased range and power, standard-range models can now charge to 100% more frequently via AC home charging. When on the road, DC fast charging to 80% battery capacity from 10% is 33 minutes, a 5-minute reduction from previous standard-range models.
Starting prices of the Mach-E will be between $42,995 and $59,995, and Ford notes that the CUV qualifies for an Inflation Reduction Act tax credit of $3,750.
However, not all BEV prices are falling.
Farley says Ford is boosting the price of the F-150 Lightning pickup (pictured, below) for the first time since its May 2021 introduction. The automaker is increasing production to keep up with demand, but.cites "significant material cost increases and other factors" in raising the Lightning's MSRP by $11,000 starting with the next wave of orders.
Stellantis, meanwhile, says it will take a more cautious approach as it rolls out its new electrified models. “The first priority is to be disciplined on pricing,” chief financial officer Richard Palmer says during a conference call with analysts.
“We are holding our price positions so that we make money on the vehicles we’re selling,” Palmer adds. “I think our products are very competitive in the segments they operate in. We’re not directly competing with Tesla that much today in the segments we’re in.
“So, we’re holding our price positions and focusing on managing our profitability across the portfolio.”