With the ever-increasing demand for electric vehicles (EVs), the competition in the EV market is getting intense. Recently, Ford CEO Jim Farley talked about how his company is gearing up to go head-to-head with Tesla on electric vehicle pricing.
Ford to Compete with Tesla on Electric Vehicle Pricing
During a recent interview with Yahoo Finance Live, Jim Farley said that Tesla has not had any competition until Ford and others came along. He added that with the entry of more players in the market, there is going to be more price competition, and Ford is counting on that.
Farley also mentioned that Tesla’s prices have gone down by $7,000 in just one year. He believes that with more players entering the market, Tesla’s profit margins will not stay so lofty in perpetuity.
Ford’s Model E Division’s Operating Loss
Ford’s push into the EV market is a significant one. However, the race to take a bite out of Tesla’s profitability is weighing on Ford in the near term. Ford revealed on Thursday that it lost $2.1 billion on an operating basis in its Model E (electric) division last year. The automaker guided to an operating loss of $3 billion for the division for 2023 as it invests in production and battery capacity.
Ford’s Cost-Cutting Measures to Boost Overall Profit Margins
To fuel its EV ambitions and bolster overall profit margins, Ford’s CFO John Lawler said that the company could take out $7 billion in costs from its legacy auto business. This statement was made during an interview with Yahoo Finance Live this week.
Ford’s EV Ambitions and the “Teach-In” for Analysts
As part of Ford’s push into the EV market, the company held a “teach-in” for analysts at the New York Stock Exchange on Thursday to provide more information about its electrified future. The event was aimed to help Wall Street better understand the inner workings of Ford by breaking out the business into three new segments: Model E, Ford Blue (gas-powered vehicles), and Ford Pro (commercial vehicles and other services).
Wall Street’s Reaction and Outlook for Ford
While Wall Street appreciated Ford’s increased transparency, reaching profits in EVs is key to getting the stock moving higher again. EvercoreISI analyst Chris McNally wrote in a note that the key for Ford’s stock, from here, is to drive market confidence in the guided $6-8Bn swing in EV profitability expected between ’23 and ’26/27. He added that he sees Ford’s stock as range-bound (between $10 and $14) while all OEMs deal with a “normalizing” incentive market over the next 12- 24 months.
In conclusion, with Ford’s push into the EV market, competition in the market is getting intense, and Tesla’s profit margins are likely to come under pressure. However, with cost-cutting measures and a focused approach, Ford is well-positioned to compete with Tesla and others in the EV market.