Ford and GM Are Still Not Giving in to Tesla’s Pricing Pressure
Tesla remains the undisputed heavyweight champ of the EV segment. All four of Tesla’s offerings—the Model Y, Model X, Model S, and Model 3—landed in the top six for EV sales by model in 2022, and to help retain its position, the company announced significant price cuts for its most popular models last year and into 2023. The affordability aspect gives Tesla added appeal among prospective EV owners that has already sparked a short-term price war. But at least two automakers, Ford and GM, apparently aren’t willing to continue throwing hands when it comes to EV pricing.
GM and Ford want to avoid a price war with Tesla
A report from Reuters notes the two giants of the U.S. auto industry will avoid engaging Tesla in a price battle. The article states GM shares are down 20% from February, and Ford stock has also felt the pinch to the tune of a 13% decline, so each brand must convince its shareholders that a price war shouldn’t be in the cards.
At least one analyst agrees with the automaker’s position.
Reuters quotes a report from J.P. Morgan’s Ryan Brinkman stating both automakers should see “drastically better trends in pricing and resulting margin impacts than did Tesla” over the first quarter. Brinkman also noted that declining EV price points could extend to all automakers, suggesting an industry-wide lowering of prices for all-electric vehicles.
Cutting costs to bolster profit margins
Reuters reports that GM’s first-quarter overall U.S. sales are up 18% from 2022. However, the company is looking to cut $2 billion in operating costs through the year, with thousands of employees already taking severance deals.
Meanwhile, Ford noted its EV segment could lose, prior to tax reductions, $3 billion in 2022. Ford’s initial Q1 report says Mach-E sales were down (though the automaker hasn’t yet released exact figures) due to “changes to increase production.”
Along with a price cut to the 2023 Mach-E announced by Ford in January—after Tesla began slashing prices for its models—the Blue Oval shared plans to amp up and streamline production of the Mach-E.
Ford and GM are both aiming to cut production costs to bolster the profitability of their EVs, and further cutting prices would only eat into those margins. It remains to be seen how the strategy plays out with both companies further cementing their footholds in the EV segment.
GM and Ford are playing a more significant role in the EV segment
Tesla owned four of the top spots for the best-selling EVs of 2022, but Ford and GM shared the others. The forebearer of Ford’s electric car movement is the Ford Mustang Mach-E, and the EV bearing an iconic nameplate has proved to be a sales success for the Blue Oval with nearly 40,000 models sold last year.
As Ford ramps up production for the Mach-E, sales of its all-electric F-150 Lightning pickups are also on the rise. The company’s Q1 report shows Lightning sales accounted for nearly half of all Ford EVs sold.
GM is going all-out on electric this year with the Silverado/Sierra EVs, Equinox EV, and Blazer EV all hitting the market for the 2024 model year with the 2023 Cadillac Lyriq now available and the near Rolls-Royce-rivaling 2024 Celestiq getting close to reality.
This influx of models both from automakers could serve to bolster Ford and GM’s EV margins, but they will still be chasing Tesla, at least in the short term. If Tesla continues to lead the sales charts, and if it retains its slashed prices, GM and Ford may be forced to cut their own prices to lead the segment.