Ford Motor Co (NYSE: F) inches down 0.68% in pre session on Wednesday as the firm releases that it will reduce the price of its all-electric Mustang Mach-E by $1,000 to $4,000, the latest step to keep up with Tesla’s regular pricing revisions.
This is Ford’s second price decrease of the year. After Tesla reduced the price of its Model Y in January, Ford reduced the price of the Mach-E range by $600 to $5,900. Despite the changes, Ford CEO Tim Farley stated on the company’s earnings call yesterday (May 2) that the company will not engage in a price war at any cost: “We are not going to price just to gain market share.” Tesla has reduced pricing on certain of its models six times this year; however it has lately boosted prices on some other models in select areas.
Ford wants to make a return after a roughly 20% reduction in Mustang Mach-E year-over-year sales due to renovations at its Mexican facility, and what better way to entice buyers than with lower prices? This reduction, though, adds to the automaker’s continuing expenditures in Michigan. While Tesla is making record profits, Ford’s electric vehicle division is losing money. Its EV segment lost a stunning $722 million before taxes in the fiscal quarter ending March 31, 2018.
The 120-year-old corporation was preparing for the costs associated with the EV switch. Ford reorganized its gas and hybrid vehicles (“Ford Blue”) and electric vehicles (“Ford Model e”) into distinct entities last year. CEO Jim Farley described the conventional company at the time as “a profit and cash engine.” It will compensate for the EV arm’s initial losses. Last quarter, Ford Blue contributed the most to the company’s $1.76 billion profit.
Ford’s Earnings Climbs Due To Robust Truck Demand
Ford Motor Co reported high first-quarter sales and earnings on Tuesday, thanks to strong demand for trucks and SUVs, but provided a cautious full-year estimate due to persistent losses in its electric-vehicle segment.
In a late briefing, Ford CEO Jim Farley stated that the company hopes to become “boringly predictable” in meeting investor expectations. Farley stated earlier this year that Ford missed Wall Street projections for the fourth quarter, leaving $2 billion on the table.
Farley also stated that Ford will not chase EV sales volume “at any cost” after the carmaker lowered Mustang Mach E costs for the second time this year earlier in the day.
Farley’s position contrasts dramatically with Tesla Inc. CEO Elon Musk’s, who stated last month that the EV maker could reduce profit margins on car sales to zero and make up the difference through sales of software-enabled services. Tesla, on the other hand, has larger profit margins on its EVs than Ford and other traditional manufacturers do across their whole portfolios.
